What is a Signature Loan?
A signature loan—sometimes referred to as a "good faith loan"—refers to any type of loan that requires a signature, rather than collateral, to process, approve and distribute the loan.
Many types of loans do require collateral to secure the debt being created between the borrower and lender. With mortgages, the home itself serves as collateral, meaning the bank can foreclose on your home and reclaim the property if you're unable to pay your bills. Similarly, auto loans are secured by the vehicles themselves.
But many types of personal loans do not require this collateral, and instead rely on a signature—along with careful vetting of the applicant—to offer assurances that the loan is likely to be repaid.
What are the Benefits and Drawbacks of a Personal Signature Loan?
For borrowers, the biggest benefit of a signature loan is that it doesn't require collateral. This means you're able to borrow money simply by signing your name on a contract and making a promise to repay what you owe.
Because there's no collateral on a signature loan, these loans are often easier to get processed and approved, assuming you meet the application requirements of the financial institution. It can also help you save money on other forms of debt accruing interest: While signature loans feature higher interest rates than secured loan alternatives, they can still dramatically reduce your total interest paid when compared to the high interest charged by credit cards.
With these benefits, though, there are also certain downsides that need to be considered. These can include:
Where Can I Apply for Signature Loans Near Me?
Ready to apply for a signature loan? You'll need to find a lender that offers this product. Start by calling your credit union to see if they offer signature loans in the amount you're seeking. You can also contact other lenders as you explore your options, gather quotes, and find out how the value of your credit union's loans compares to the rates and terms offered by other lenders.
While some lenders may not offer signature loans, you should still be able to find a number of lenders willing to provide this financial product. Keep in mind, though, that your options for obtaining a signature loan may decline as the dollar amount you're seeking increases.
How to Get a Loan from a Credit Union
Once you decide to apply for a signature loan from your credit union, you'll need to review the credit union personal loan requirements carefully to make sure you have everything you need to apply.
At a minimum, the credit union will likely require the following:
In some cases, the lender will also request a co-signer on your loan to lower the perceived risk of providing a loan without any collateral.
When used to consolidate debt or achieve other financial goals, signature loans can be a great financial product that preserves your liquidity and spares you the trouble of committing another major asset as collateral on a loan. Contact your credit union today to find out the current rates for this type of loan.