About 21 million people in the U.S. have a personal loan. It’s a way to consolidate debt, pay for a large purchase, or take care of an emergency expense.
If you need money fast, you have no shortage of options. You have different types of personal loans, such as payday loans and signature loans.
You’re probably familiar with payday loans. They let you borrow a small amount of cash quickly.
What is a signature loan? It’s a loan that lets you borrow money just with your signature. You don’t provide collateral.
There are a lot of advantages of signature loans. Keep reading to learn what they are and how you can get one.
1. Fast Approval
Online signature loans often let you apply for a personal loan and get instant approval. Compare that to a bank or credit union, where it might take days to get a personal loan approved.
All you need to apply is your ID and proof of income. Upload them with your application. Lenders often approve loans in minutes.
Some online lenders will deposit funds into your bank account on the same day.
2. Non-Traditional Credit Check
Lenders have to be careful as to who they let borrow money. They want to make sure that you can pay back the loan. After all, they’re trusting that your signature means you’ll pay the loan back.
They don’t ask that you secure the loan with property. They’ll verify your income and many lenders will check your credit score.
Your credit score might be below average, which means that you won’t get approved for a loan.
It’s possible to find a lender that offers a no-credit-check loan. These lenders charge much higher interest rates, so you’ll end up paying much more in interest.
Look for lenders that look beyond your credit score. They look at other parts of your credit report to determine if you’re credit-worthy or not.
3. Funds for Any Purpose
Did you know that you can use signature loans for any purpose? You can use the funds to take a vacation, fix your car, take your pet to the vet, or pay for a large project.
You can even use the funds to start your own business. Many people find the flexibility helpful and they can accomplish several financial goals at once with a single loan.
4. Borrow More Money
Loans like payday loans limit the amount of money you can borrow. Most payday loans are between $250 and $1000.
That’s not the case with signature loans. You can take out as much as you need, provided that you have the income and credit report to show lenders you can repay the loan.
Most borrowers take out between $5,000 and $15,000. That’s plenty to take care of a few financial issues, like consolidate credit card debt.
5. Better Interest Rates
Speaking of credit card debt, you’re likely to be well aware of how much interest you pay on credit card debt. That makes it harder to pay down your debt.
You can have most of your monthly payments going towards interest, while a small amount of money actually pays down the debt. It feels like you barely make progress each month.
The solution is to get a signature loan that has a lower interest rate. You save money because you pay off the high-interest debt.
6. Longer Payment Terms
There are some loans that you have to pay back in a couple of weeks. Car title loans and payday loans have loan terms between 14-30 days.
If you don’t pay the loan back in full, you have to take out another loan. There are fees charged with each loan, so you get stuck in a cycle of loans and debt piling up.
The terms of the loan are longer. You can pay the loan back between 12 and 60 months. That depends on your lender and the amount of money you take out.
7. Predictable Payments
Signature loans are installment loans. The payments combine the interest and principal into one monthly payment.
You pay the loan back in fixed installments over the life of the loan. This makes budgeting a lot easier because the payments don’t change.
How to Get a Signature Loan
Do you think that signature loans can help you improve your financial situation? You have to prepare yourself to get a signature loan.
Remember, lenders aren’t going to give money to anyone. You need to present yourself in the best possible light to get approved at a good interest rate.
Get your documentation together. You’ll need a copy of your ID (passport, driver’s license, etc.) and pay stubs to prove your income.
If you’re self-employed, lenders might want to see your most recent tax returns or bank statements.
Shop around for a lender. It’s important to find a lender that has a great reputation and excellent customer service.
Get pre-qualified for loans to see what lenders will give you. They use a soft credit check, so it doesn’t impact your credit score.
You’ll get to see rates, amounts, and payment terms. Compare the rates and look at the total cost of the loan, not just the monthly payments.
When you find a good deal, fill out a formal application and send your paperwork for approval. The lender will do a hard credit check.
You’ll get approved and get the funds deposited into your bank account.
The Many Advantages of Signature Loans
Signature loans are an easy way to get money quickly. You can apply online, get approved, and get funds deposited into your account within a couple of days. You might get the funds on the same day!
You can use them for just about anything, from consolidating debt to paying for a large project.
If you enjoyed learning about the advantages of a signature loan, you’ll appreciate the other articles on this site. Check them out today!