A signature loan is the one that only depends on the signature, usually an e signature, of the borrower. It is given on the personal guarantee of the borrower rather than on collateral as some kind of security. It is a type of personal loan and is also called character loan as it is given viewing the good character of the borrower. Collateral is not taken in offering such types of loans.
It is not always possible to look to your family or friends when you need money. It may not look good or they simply may not have money to give you. In such a situation, what other options are you left with? Well, signature loan lenders offer you money in these conditions.
Conventional loan offering institutes and banks have their own complicated set of rules and regulations. They demand high credit scores, good sources of income, personal guarantees and heavy documentation. They try to eliminate the chances of default.
Applying for a signature loan requires you to have a bank account like any other personal loan lender. You need to have a job so that you can repay the loan and online form is filled to apply for the loan. As the requirements are comparatively low as compared to regular brick and mortar loan providers, people usually prefer to go for them.
Money got through these signature loan lenders can be used for similar purposes as through any other personal loan. You can pay educational fee, can pay off your medical expenses, can buy electronic gadgets or can meet any other emergency.
Signature loans are a good option for people who do not have any type of collateral. As their application will be rejected by a bank, they are left with only unsecured loan options. And among these, signature loans are a good option when you need money. As you are not offering any asset as collateral, you not need to worry about it in case of default. As you have not given your asset as collateral, no one can take it away from you. So, signature loans offer lesser risk to the borrower.
One drawback of the signature loans is the higher interest rate you need to pay on the loan. As the lender has not taken any kind of security from you, you need to pay higher interest charges on the loan. Secondly, repayment installment amounts are larger as compared to other loans. The lender needs to get the payment back faster so they arrange larger installments.