Because so many people who need a loan do not have substantial assets to use as collateral, many lenders have answered this consumer demand with more options for signature loans. This type of lending product is known as an unsecured loan because it does not require putting up real estate, a vehicle or jewelry as collateral. The loans are available from a broad range of financial institutions and lending companies. Interested consumers may view additional details online.
How the Signature Loan Process Works
These financial products also are called personal loans and good faith loans. The borrower may be asked to provide proof of income and the lender may want to do a hard check on the person’s credit rating. However, sometimes these details are not even necessary. The borrower usually isn’t required to explain what the money will be used for. The person’s signature functions as a promise to pay the money back in full with the amount of interest included in the agreement.
The companies use various methods to ensure they are making sound lending decisions. Lower-interest loans will have more stringent requirements. Borrowers who have relatively low income and a poor to fair credit history may only qualify for the higher-interest options. Those loans have steeper interest because the default rate is higher. The company has to spend more time and money on collections activity. In some cases, the borrower may eventually declare bankruptcy and never pay off the amount due.
Why Consumers Increasingly Choose Online Loans
Banks and credit unions offer personal loans, but many of their customers do not qualify for their more restrictive requirements. Other lending companies can be found in most cities as well as online. Consumers have increasingly begun to appreciate the convenience and privacy of borrowing money through online sources.
A traditional personal loan application can take a week or two to be approved by a bank or credit union. In contrast, signature loans from other lending companies often are approved within just one or two business days. If the application was completed online, the money can be automatically deposited into the customer’s checking account.