The only difference between a signature loan and a personal loan is the collateral associated with them. A signature loan is always unsecured, which means it doesn't require collateral, and a personal loan can be unsecured or secured by collateral. The term "signature loan" is actually just another way of referring to an unsecured personal loan.
Getting a signature loan may be difficult because it is risky for lenders to offer them due to the lack of collateral. To qualify for one, you'll need to be at least 18 years old, have a credit score of at least 580 and have enough income to make monthly payments.
A signature loan is an unsecured personal loan that does not require any collateral other than your signature. Your signature represents your promise to repay the loan and makes the loan agreement a legally binding document.
The best signature loans have APRs as low as 2.49%.
Signature loans often have origination fees of 1% to 8%.
The payoff periods are 12 months to 144 months (12 years).
You'll need to meet the lender's credit score and income requirements to qualify for a signature loan, along with other requirements like being at least 18 years old, having a bank account and having enough income to make monthly payments.
A signature loan is a good idea if the loan is inexpensive compared to your other options and affordable based on your current budget. It’s also best if the expense you’re getting the signature loan for is truly necessary, as you don’t want to take on debt without good reason.
A signature loan is a loan that doesn’t require any collateral other than your signature. You can learn more about when getting a signature loan is a good idea below.
When a Signature Loan is a Good Idea
If the loan’s terms are better than your other options
You may get a lower APR on a signature loan than a credit card if you have good or excellent credit. However, some credit cards offer 0% APR introductory periods for as long as 21 months. So, if you need funds for a relatively small expense, a credit card may be a better option.
You may also be able to get a loan with flexible terms from a friend or family member. You risk damaging your relationship if you don’t repay the loan, though.
If you know you can repay the loan
Signature loans can take a few months to a few years to repay. You’ll need to make sure you can afford the monthly payments, along with your other monthly expenses.
Signature loans will also improve your credit score if you make all the monthly payments and do not default. On the other hand, late payments can cause credit score damage.
You can use a signature loan to pay for weddings or vacations, too. However, it’s best to save your money to pay for luxuries like these.
In the end, a signature loan is a good idea if you can repay the loan and if the loan’s terms are better than your other options. To see the top-ranked offers, check out WalletHub’s picks for the best signature loans. You can also pre-qualify with multiple lenders using the free pre-qualification tool on WalletHub.
WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.
WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines. This question was posted by WalletHub. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.
Ad Disclosure: Certain offers that appear on this site originate from paying advertisers, and this will be noted on an offer’s details page using the designation "Sponsored", where applicable. Advertising may impact how and where products appear on this site (including, for example, the order in which they appear). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.