Need some money fast? Well, hitting the lottery is a possibility. Your chances to win the fantasy football league may be good this year. But if you need reliable cash, a loan might be a better option.
What is an unsecured signature loan?
If you own property like a home or a car, taking out a secured loan may be an option for you. A secured loan is backed by collateral. You put up property of an equal or greater value than the amount you’re borrowing. If you default, the lender takes the property.
Mortgages are secured loans. Home equity and auto loans are also secured. They each have property or assets attached to them. Unsecured loans do not. They are given by the lender without a need for any collateral, so they’re typically smaller and have a higher interest rate.
The most common example of an unsecured loan is a signature loan. A signature loan is an unsecured loan that only requires income information, credit history, and your signature. It’s also known as a good faith or character loan.
When does a signature loan make sense?
As of 2019, only 40% of Americans have enough in savings to cover an unexpected $400 expense. That number may be even lower in 2020, with the rise in unemployment due to the Covid-19 crisis. For millions of people, times are tough and money is tight.
In scenarios where instant cash is needed and there’s no collateral available for a secured loan, or if you’re just worried about collateralizing a much-needed car, a signature loan is a good option.
People with less than perfect credit scores shouldn’t be discouraged from applying for a signature loan. Though your credit score can be a factor, a low score won’t necessarily disqualify you. There are signature loans available for people with every kind of credit history, and you should still be able to get the cash you need.
Shopping for a signature loan lender
You can find online loans and apply without leaving home. You’ll want to shop around a bit to find the best rates and be sure to ask if there are loan origination fees. Some lenders also have prepayment penalties if you pay the loan off early, so ask about that also.
Other relevant questions should include interest rate options and late payment fees. No one wants to be late with their payments, but it happens. Find out how much that will cost you if you end up behind during the term of the loan.
In addition to making sure the fees and repayment plan make sense to you, make sure to research the lender and look for reviews and appropriate licensing in your state. You never want to risk sending sensitive financial information online to anyone other than an officially licensed lender.
With that in mind, research the wide variety of online options that have emerged and you’re sure to find a loan the fits your needs.
Notice: Information provided in this article is for informational purposes only. Consult your attorney or financial advisor about your financial circumstances.
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Original Source: Could a Signature Loan Be the Right Loan for You?
