How Can I Get Signature Loans With Bad Credit?

The Credit Review
December 1, 2019 Personal Loans
How Can I Get Signature Loans With Bad Credit?

What Is A Signature Loan?

A signature loan is a specific type of unsecured personal loan (sometimes referred to as a character loan or good faith loan) since it only requires your signature as a guarantee that you will pay the loan back in full.

These loans are offered by banks, credit unions, and online lenders. Because of their online availability, they have grown in popularity due to the ease of the application process.

Just like other personal loans, signature loans can be used for any purpose and are ideal for borrowers who are looking for debt consolidation (combining multiple high-interest credit cards into one monthly payment with a lower rate), emergencies, medical bills, or home improvement.

Signature loans usually encompass the following types of personal loans:

  • Convertible loans
  • Fixed-rate loans
  • Variable-rate loans
  • Installment loans
  • Secured loans
  • Unsecured loans
  • Single-payment loans

How Does It Work?

When you apply for a signature loan, lenders will look at your credit history and income to determine your rates, terms, and whether or not you need a cosigner.

Signature loans used to be reserved specifically for consumers with bad credit but they are now being used by consumers with good credit as well.

Because signature loans are typically unsecured, they are not tied to any collateral (such as any assets or a post-dated check). While not risking your personal property is generally a good thing, you will generally pay higher fees and interest rates than with a secured loan.

Since signature loans are usually installment loans, you will make equal monthly payments until the loan is fully paid off. They generally have fixed rates and term lengths from a few months to a few years (although most signature loans usually have extremely short terms). Loan amounts typically range from $500 to $50,000. If you have lower income or bad credit, amounts tend to be lower and interest rates will be higher.

Whether you have good or bad credit, it's important to take any major financial decision seriously. Make sure you do your research, take your situation into account, and compare all your options before taking out a loan.

Where Do I Get A Signature Loan?

There are several ways you can take out a loan but the most popular methods include taking one out through a bank, credit union, or online lender (which can help you compare rates and terms).

To apply online, you simply have to fill out an application and provide basic personal and financial information that may include:

  • Your name
  • Date of birth
  • Valid email address and phone number
  • Social Security number
  • Driver's license or valid ID
  • Proof of income
  • Checking account number
  • Employer information
  • W-2s
  • Bank statements
  • Recent tax returns

Your loan terms and rates are dependent on your creditworthiness. If you are applying on an online platform, preapproval (which includes your potential APRs, terms, rates, and due date) can take as little as two minutes. Approval and funding can take anywhere from one day to several weeks (depending on your lender). Many lenders can deposit your funds directly into your checking account.

Something to keep in mind: while most lenders will run a credit check, there are "no credit check" signature loans available. These usually come with high interest rates and unfavorable terms, and are usually reserved for borrowers with bad credit; this is because lenders look at your history of repayment to ensure that you will pay back the borrowed amount.

Pros And Cons

Still on the fence? Knowing the advantages and disadvantages of a signature loan can help you finalize your decision.

Pros:

  • No collateral needed
  • Quick application and approval
  • Easy to qualify
  • Shorter loan terms

Cons:

  • High interest rates with bad credit
  • Additional fees depending on your lender (origination fee, prepayment fee, late fee)

The Bottom Line

If you need quick cash, a signature loan might be the right short-term solution for you -- as long as you are sure you can pay it back and avoid high interest.

Not sure where to start? Look to one of our reputable lenders to get started. 

How does a signature loan work?

A signature loan is an unsecured loan which is paid off in monthly installments. Interest rates generally tend to be higher than other types of personal loans. Additionally, the account is closed once the loan is paid off in full.

Will my lender run a credit check for a signature loan?

Most likely, yes. Lenders need to look at your credit history to determine how likely you are to repay the loan. However, this hard pull will only damage your credit slightly.

What is the difference between a personal loan and a signature loan?

A signature loan is essentially an unsecured personal loan, meaning that there is no personal asset (such as a home mortgage or property) tied to the loan. A personal loan may or may not have collateral tied to it.