Signature Personal Loan

Key Differences Between Signature Loans and Other Short Term Loans

A signature loan is a kind of personal loan that does not require collateral. This loan is unsecured meaning you will not place security such as the equity in your home or any other property and asset like car loans. But, when it comes to an unsecured credit facility, you know what follows next- high interest rates. Depending on the lending institution you are dealing with, the amounts of these loans can vary from somewhere between $500 and $20,000 or even more.

These loans are typically intended for things like major purchases, unexpected expenses such as medical bills, home improvements, debt consolidation, vacations, and holidays. Signature loans attract a fixed rate of interest offered in a fixed loan term. Basically, repayment terms can range from somewhere around 2 years to about 5 years.

The interests will also vary based on your income and credit score. Before you embark on borrowing these loans, it is essential that you understand the terms. Although the loans will vary widely from one institution to another, they have similar characteristics. Most banks provide a term of about 12 to 48 months on signature loans.

The guidelines provided by the individual financial institution and the payment amount, which the borrower wants to make each month help in determining the length of payment. The size of these loans will also vary but individuals can borrow more or less based on their financial requirements. The bank looks at the credit rating of the borrower and the ability to repay in order to determine how much it can lend the borrower.

Besides, the lender also clarifies the employment and income of borrower as parameters of ability to repay the credit facility. These loans are common among financial institutions and most are willing to offer the credit facilities to people willing to pay the high interest rates. With automatic monthly payments taken from your bank account to help in repaying the loan, it can help meet the payments in time.

One benefit about these loans is that they have a fixed monthly repayment plan. This allows you know exactly what you are supposed to pay every month thus being able to plan yourself in advance. When you pay the loan as agreed without delinquencies, you are able to increase your credit score.

And, in the event that you default that loan, the bank is not able to repossess any of your property since, in the first place, they are unsecured. However, failure to repay in time or defaulting your credit facility will further hurt your score thus defeating the logic of borrowing since most people who will go for this kind of loan may have the goal of building their score.

Because the loans have fixed repayment plans, it means you know when you will settle the credit facility fully. In addition, these loans are much preferable over the credit card debt because their interest rates are a little bit less. As a cautionary measure, people with poor credit score need to watch out when borrowing these types of loans because they may pay 2 to 3 times more than the other people.

Signature Personal Loan