Signature loans can be a good fit if you don’t have any collateral to put up for a loan or would simply rather not risk any that you do have. For banks it’s a riskier type of loan because if you don’t repay, they have no way of recouping the money they lent, which is why they are considered ‘high risk’ loans. This is why signature loans are oftentimes reserved for people with good credit. However, it is still possible to get a loan with a credit score under 600, with even some loans available for a 500-550 credit score.
A signature loan is a unique type of loan offered where the only thing banks require as collateral is the borrower’s signature and promise of intent repay.
Think of them in the same way as you would with installment loans for bad credit. You get a certain amount of money with a set period of time to pay it all back—much as you would with any personal loan.
Different lenders have different standards, all do some kind of credit check even those advertised as bad credit loans guaranteed approval. While most lenders use your credit score and credit history to determine qualification, others have their own criteria, such as income and employment history, which may help you get approved if you’ve been turned down for other types of loans. Payday loans often do these kind of alternative credit checks, and sometimes also small signature and installment loans.
Credit scores can affect a lot of things in your life because they reflect your level of financial responsibility. A higher score shows that you pay your debts and that you know how to manage money. A poor credit score suggests that there might be some financial difficulties in your life or that you are just getting started.
When it comes to loans, if you have a low credit score, not only will your APR be higher, but the amount you’ll be eligible for will be lower. If your score is too low, you may not be granted a loan by a lender. If this happens to you, you’ll want to improve your score first before applying and looking loans for loans with instant approval.
A soft credit check occurs whenever a company or person looks at your credit report as a pseudo background check. This occurs whenever a mortgage lender preapproves you for a loan, or when an internet or phone company is deciding whether to take your business.
Soft credit checks happen all the time and frequently happen without even your permission or knowledge. The good news is that these kinds of credit checks don’t hurt your credit score in any way.
A hard credit check, on the other hand, happens whenever a possible lender runs a credit inquiry of your credit report, possibly after receiving an application online for an electronic signature loan, and uses the information gathered to decide whether or not you qualify.
A hard inquiry will lower your credit score and leave a derogatory mark that will stay on your credit report for as much as two years. Should you decide to apply for a personal signature loan, your lender will run a hard credit check.
Yes and no. Some lenders start off with a soft credit check, but when you accept a loan offer for a signature loan, you will always get a hard credit check (and these types of inquiries affect your credit score). However, if you have a good amount of credit history, a credit inquiry won’t hurt your score by that much (usually less than five points). If you have little to no credit history, the inquiry may hurt it more.
Remember that a much greater voice in your credit score is on-time payments. Keep up with your payments every month and your score will rise over time.
The first advantage of a signature loan is that you don’t have to put anything up as collateral. It is an unsecured loan. Should hard times fall, you won’t lose your house or your car.
The second advantage of a signature loan or personal loan is that you can do anything you want with the money (so long as it’s legal, of course).
Here are the top five things you can do with a signature loan:
If you have a lot of credit cards that are maxed out, you could get a personal or signature loan to consolidate all of your monthly payments to just one. Better yet, the APR on your loan would likely be lower than the APR on your credit cards, which means, here again, that you would be able to pay off your debt faster than you would have before.
There are a couple of ways a signature loan can improve your credit score. The first way is it will add a new type of credit to your credit mix or variety. If you have different types of credit on your credit profile, you’ll get a favorable bump to your score. The second way they will improve your score is that they will add to the amount of credit you have at your disposal. The amount of credit you use versus the amount you have available is what can lower or raise your score. Maxed out credit lines will always hurt you, but credit lines that are available but aren’t being used will always help.
Student loans can have high interest rates, but it’s quite possible you could get loan with a lower APR, which would help you pay off the loan faster.
Often, we don’t have the cash for a large life event, but that doesn’t mean we can’t still take part. A signature or personal loan can help us keep up with family responsibilities while still offering manageable monthly payments. There are even signature home loans available if you meet certain criteria.