When looking for short-term financial solutions, a signature loan could be a great option for you. If you don’t like the idea of putting up collateral for a personal loan or lack the necessary collateral, signature loans are an available financing option. For many individuals, the idea of losing a valuable asset to a lender in the event of a loan default is pretty scary, so knowing that there are other options to help you conquer unforeseen financial circumstances, debt consolidation, home improvements, or major life events like a wedding, is a sigh of relief. Here’s the breakdown on signature loans.
What is a Signature Loan
Signature loans in Utah are “good faith” or unsecured loans that are made available based on your credit history and do not require any collateral to obtain. It’s a type of personal loan that is paid to the borrower in a lump sum and the borrower is expected to pay the loan back with interest in a predetermined period of time, typically within five years or less. The loan’s terms and interest rate will hinge on the borrower’s credit score. It’s important to understand that these short-term loans almost always have higher interest rates than secured loans even if you have impeccable credit.
How Signature Loans Work
The inner workings of a signature loan can differ from lender to lender, but at their core, they are all the same. You choose a lender and submit the application. If you are approved for the loan, then you’ll sign and agree to the terms of the loan and the money will be disbursed to you. In order not to default on the loan and keep your credit score healthy, you’ll need to pay back your loan as scheduled. An unpaid unsecured loan can stay on your credit report for seven years, making you a less attractive borrower. Many lenders will allow you to pay off the loan early to save money on interest payments, but be sure to read the fine print, as some lenders assess a prepayment penalty or a fee for paying off the loan early.
Where to Get a Signature Loan
Signature loans are becoming increasingly available online. They are also available from traditional banks and credit unions. If you decide to go with an online lender, it is in your best interest to do your due diligence to ensure that you’re working with a reputable lender. The signature loan process is just like the personal loan process. While you’re loan shopping, check your credit report so you have an idea of what the lender will be using to assess your risk. Once you’ve decided on a lender you’ll want to get prequalified and submit your application. Submitting an application will lead to a hard credit inquiry which will lower your credit score some. If you’re approved for the loan, you’ll need to sign the loan agreement or promissory note. Be sure to read the fine print details regarding your signature loan before entering into the contract. Once you’ve agreed to the terms, loan funds will be dispersed and you will begin repayment. Keep your loan repayment current to avoid damaging your credit score.
When you need money quickly for any of life’s many unforeseen circumstances, a signature loan could be the solution to your problem. If you don’t have healthy credit and the means to pay back your loan and keep it in good standing, this isn’t a good option for you. You may be causing more hardship.