What Is a Signature Loan?

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A signature loan is a type of personal loan that doesn’t require collateral. It’s often also called an unsecured personal loan.

With this type of loan, you simply sign your name on the loan agreement as a promise to repay the borrowed money–hence the name. That doesn’t mean just anyone can get approved — the lender decides to trust you based on your credit score and income information, not assets such as a house or a savings account.

Signature or unsecured loans can be used for a variety of purposes, including to consolidate debt or to pay off unexpected medical expenses. You should avoid using one for nonessential purchases like a vacation.

How Does a Signature Loan Work? 

With a signature loan, you borrow a fixed amount of money from a bank, credit union or online lender. Then, you’ll repay the loan over time with fixed monthly payments. This means a signature loan is an installment loan.

Interest on a Signature Loan

The interest rate you’ll pay to borrow money through a signature loan is based on your credit score. Higher credit scores show lenders that you’re likely to repay the loan on time without issue, so they qualify for lower interest rates.

On the flip side, lower credit scores represent more of a risk to lenders, so they typically qualify for higher interest rates, meaning it’s more expensive to borrow money.

Repayment Terms

Signature loans generally have repayment terms ranging from one to five years. The exact term you qualify for will depend on your financial information like your credit score and income details.

Signature Loan Requirements 

If you’re wondering how to get a personal loan such as a signature loan, you’ll want to keep the following requirements in mind and consider them before you apply.

1. Have a Fair to Good Credit Score

First off, you’ll need a credit score in the fair range — usually 580 and above. Many lenders have minimum credit score requirements, which you should investigate before applying.

2. Show Income or Proof of Employment

You’ll also need to demonstrate steady income and proof of employment as part of your loan application. Lenders need to see that you have money coming in regularly to feel comfortable lending you funds that you’ll repay on a consistent monthly basis.

3. Have a Low DTI

Having a low debt-to-income ratio (DTI), meaning you spend or borrow a relatively small portion of the money you earn, is also a positive sign to lenders and can improve your chances of getting approved for a loan.

4. Have Your ID and Social Security Number Ready

Beyond that, you’ll need to provide a government-issued ID and your Social Security number as part of your signature loan application.

How Much Can You Borrow with a Signature Loan? 

Signature loan amounts generally range from $1,000 to $50,000. Some lenders may offer up to $100,000 to highly qualified borrowers with high credit scores and sufficient income.

The amount you can borrow depends on your credit score, as well as your income and employment status and your debt-to-income ratio.

Generally, people applying for a personal loan need to borrow enough to cover expenses such as credit card consolidation, large purchases like medical bills or car repairs, or other unexpected emergencies. You’re not guaranteed to be approved for the exact amount you need, but having a good credit score and strong income and employment history can boost your chances.

How To Get a Signature Loan 

Follow these steps to get an unsecured loan.

1. Check your credit score. You should know your score before applying so you’ll know if you stand a good chance of getting approved.
2. Compare lenders and prequalify. Some lenders allow you to prequalify for a loan by sharing some financial information, which can give you more confidence in your approval odds before having to submit to a hard credit pull.
3. Gather documents and apply. You can either do this online or in-branch at brick-and-mortar lender locations.
4. Accept terms and receive your funds. Make sure you review all the terms, including all possible fees, before signing your signature loan documents.

It’s key to know the pros of cons of a personal loan, such as a signature loan, before you apply. This way, you’ll be aware of the advantages and the potential downsides if you’re not able to keep up with payments.

Signature loan pros include: 

• No collateral needed 
• Fast approval and funding 
• Fixed payments make for easy budgeting

Signature loan cons include:

• Higher interest for low credit scores 
• Can hurt credit if you miss payments 
• May have fees, such as origination or late payments

Is a Signature Loan Right for You? 

A signature or unsecured personal loan could be a good fit for you if the following criteria apply:

• You need cash fast 
• You have strong credit and steady income 
• You want predictable monthly payments 

However, it may not be a good option if:

• You have bad credit 
• You’re unsure you can afford to make the payments 
• You’re considering a secured loan for lower rates 

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