A Complete Guide On Signature Loans For Bad Credit
Applying for credit can sometimes be frustrating due to the long processing time and the sheer amount of paperwork involved. Although, what if you could get the financing you need just by signing your name?
Signature loans for bad credit applicants are a convenient, fast, and less well-known option to secure funds to help pay for almost any expense. Let’s take a look at this type of borrowing and find out if it suits your needs.
What Is A Signature Loan?
As the name suggests, a signature loan is a type of lending product that requires very little documentation. Banks and credit unions typically issue these loans to long-standing customers with a reasonably good repayment record.
- The significant advantage of this type of lending is the speed of approval and the fact that you don’t need to spend any time putting together a set of documents for submission
- The APR you’re likely to pay with this lending product will tend to be higher than the rate you might receive on a traditional loan. This added cost may be worthwhile if you need some money to pay for urgent expenditures and require same-day funding
Can Bad Credit Borrowers Apply?
It’s not necessary to have a super high score to apply for signature financing. In fact, this type of borrowing used to be extremely popular with low FICO rating customers in the days before online lenders entered the market.
- It’s essential to read through your free annual report and look for any negative marks regarding late payments, charge offs, defaults, and bankruptcies. All of these factors could make your bank or union reluctant to approve your application
- Since this type of lending is based on good faith and your perceived ability and willingness to pay your debts, you’ll want to do your best to make all your debt repayments on time and keep your score as high as possible
The Pros And Cons Of Signature Loans
A lending product that only requires you to sign your name is appealing. However, as with any financial product, you’ll want to weigh up the benefits and disadvantages before you apply. Here are some things to consider regarding this type of financing.
- Speedy application times: A visit to your bank or an online application is all that’s needed to secure this type of lending product. Additionally, you’ll know the outcome of your application almost immediately
- No documentation required: You’ll save time and effort by not having to compile documents pertaining to your identity, income, employment situation, and other financial information
- Fast access to the cash you need: If you have pressing financial obligations or emergency medical expenses to pay for, you’ll appreciate the speed and efficiency of this lending product type
- Higher APRs: It may be possible to secure a lower interest rate by applying for a personal loan or credit card. Bad credit lending products do require some documentation, but many of them also offer same-day approval and fast funding, which makes them an alternative to explore
- You’ll need a solid banking track record: If you don’t have a bank account or if your banking history is less than perfect, this could count against you when you apply for this type of lending
Signature Loans Vs. Credit Cards
Credit cards are another popular type of financing that you can use to pay for your expenditures or even refinance smaller debts. The following table shows how these cards compare to signature lending products.
Days to weeks
14% - 22% depending on your FICO score
10% - 12% depending on your lender
Revolving - you can choose to pay only the minimum balance
Up to five years
Use of funds
Almost any expense
Almost any expense
Where To Apply
Unlike personal loans offered by a variety of lenders, a signature lending product is usually only obtained from a bank or credit union.
- You’ll want to contact your financial institution ahead of time and precisely determine what instant lending options they provide. You’ll also want to decide whether or not they’re able to pre-approve your application telephonically. This capability will save you the trouble of visiting your bank during the COVID-19 pandemic
- If you’re not currently a bank client, you may want to join your local credit union to take advantage of the personalized customer service it offers
The Bottom Line
Signature loans can be a very convenient way of accessing funding quickly when you need to pay for urgent expenses.
While bad credit customers can apply for this type of financing, you’ll still want to note the benefits and disadvantages of this lending type before proceeding with your application.