What Is a Signature Loan?
A signature loan is an unsecured personal loan that does not require collateral other than the borrower’s signature, which represents their “good faith” promise to repay the loan. The borrower’s signature on a signature loan makes the loan a legally binding agreement.
The best signature loans have low APRs and no origination fees. They can offer as much as $100,000 in funding and have payoff periods as long as 84 months. You may qualify for a signature loan if you meet the lender’s credit score and income requirements. Different lenders will also have different supplemental requirements.
Best Signature Loans in 2023
| Lender | Best For | APR | Loan Amounts |
|---|---|---|---|
| LightStream | Low APR | 7.99% - 25.99% | $5,000 - $100,000 |
| Discover | Long-term | 6.99% - 24.99% | $2,500 - $40,000 |
| SoFi | Large loan | 8.99% - 25.81% | $5,000 - $100,000 |
| Best Egg | Fair credit | 8.99% - 35.99% | $2,000 - $50,000 |
| Achieve Personal Loans | Bad credit | 7.99% - 29.99% | $5,000 - $50,000 |
Below, you can learn even more about signature loans, how they work and who can qualify. You can also start searching for the best signature loan for your needs with WalletHub’s free pre-qualification tool.
How Do Signature Loans Work?
Signature loans work similarly to other types of installment loans, except approval is based on your reputation as a borrower and your word rather than collateral. When you get a signature loan, a lender will give you a lump sum of money that you will then pay back over a set amount of time.
If you don’t pay as agreed, the lender will report negative information to the credit bureaus, hurting your credit score. The lender could sue you or send your debt to collections, too. If you pay the bills on time, however, a signature loan can help improve your credit score.
You can essentially use a signature loan for anything you want. Just keep in mind that unsecured loans like signature loans are riskier for lenders, so they may come with higher interest rates than secured loans.
Learn more about how signature loans work.
How to Get a Signature Loan
- Figure out what type of loan fits your needs. Some types of signature loans include unsecured personal loans, student loans and certain home improvement loans. Each type of signature loan has its own purpose and requirements to get approved, but they will not require any collateral.
- Check your credit score. Checking your credit score helps you see what you can qualify for. You can check your credit score for free on WalletHub.
- Pre-qualify with multiple lenders (if possible). Pre-qualifying can help you see which lenders may approve you and what rates may be available to you. You can pre-qualify with multiple lenders for free on WalletHub.
- Compare your options. You should compare lenders based on their APRs, payoff periods, loan amounts and fees. To compare the costs of each loan offer, check out the free personal loan calculator on WalletHub.
- Choose the loan that works best for you. You’ll need to choose a loan you can qualify for that also gives you enough funding for your needs at the right price.
- Submit an application. You can do this online, over the phone or in person at a branch.
- Sign after you’re approved. Once you’re approved, you’ll need to sign the loan agreement. This makes the document legally binding.
- Receive the funds. You should receive the funds within a few business days of signing the loan agreement.
Signature Loans vs. Secured Loans
| Category | Signature Loans | Secured Loans |
|---|---|---|
| Collateral required? | No | Yes |
| Typical credit score requirement | 580 – 700 | Often available to people with bad credit (score below 640) |
| APR | Usually 4% to 36% | Depends on the value of your collateral |
| Loan amounts | $1,000 to $100,000 | Depends on the value of your collateral |
| Repayment periods | 12 to 84 months | 12 to 84 months |
Other than their lack of collateral, signature loans have a few other characteristics that separate them from secured personal loans.
Approval Requirements
Signature loans are significantly harder to get than secured personal loans. They often require a credit score of at least 660 for approval, and some even require scores of 700+ (good credit). There are a few signature loan providers that service people with credit scores as low as 580, but they are less common and have very high APRs.
The reason signature loans typically require higher credit scores is that borrowers with lower credit scores carry a higher risk of defaulting. However, since secured personal loans offer a way for the lender to recoup their money easily no matter what, lenders are usually inclined to offer them even to people with bad credit.
Cost
Signature loans tend to be more expensive than secured personal loans. Sure, signature loans can have very low rates for people with excellent credit, starting at around 4% to 6% with the best lenders. But borrowers with lower credit scores are likely to get a much better rate on a secured personal loan than on a signature loan.
This is due to the greater risk for the lender with a signature loan. Since lenders can’t get their money back instantly after a default, they charge higher rates.
Credit Score Needed for Signature Loans
Signature loans work best for people with good-to-excellent credit, as they have a shot at qualifying for low APRs and no origination fees without having to put any collateral on the line.
For people with lower credit scores, signature loans may still be attainable but could be very expensive. Getting a secured personal loan instead is a good way to cut costs and increase approval odds. But secured personal loans come with the risk of losing the collateral used to get them, so it’s up to the borrower to determine whether the risk is worthwhile.
The best way to estimate your odds of qualifying for a signature loan is to use WalletHub’s free pre-qualification tool. You’ll be able to see which lenders are likely to approve you, along with an estimation of what APRs you might receive.
Tips for Getting a Signature Loan
- Sign as soon as possible.
Once you’re approved for a signature loan, you’re still not able to access the money until you sign the loan agreement (either physically or through an e-signature). The longer you wait to complete this part of the process, the longer it will take for you to get your loan money. - Compare your options thoroughly.
There is an abundance of options for signature loans on the market, so it’s important to compare loans thoroughly before settling on one. In addition to factors like APR and fees, you should also consider things like the loan amounts and payoff periods available. - Get pre-qualified.
Before you apply for any signature loan, it’s a good idea to get pre-qualified if the lender offers it. This will show you your approval odds and potential rates ahead of time, without hurting your credit score. You can also use WalletHub’s free pre-qualification tool to get pre-qualified for multiple loans at once. - Always pay on time.
Even though there’s less risk of losing your property with a signature loan compared to a secured loan, it’s still vital to make on-time payments every month. If you don’t, your credit score will suffer and you may have to pay expensive late fees. - Track your credit score.
If you keep up with your monthly loan payments and are responsible with any other credit you might have, you should see your credit score increase over time. You can join WalletHub for free to see daily updates to your credit score and credit report, as well as get personalized advice on what you can do to improve.
