Signature Loan

What is a 'Signature Loan'

A signature loan is a type of personal loan offered by banks and other finance companies that uses only the borrower's signature and promise to pay as collateral.

A signature loan can typically be used for any purpose the borrower chooses, although the interest rates will be higher than most forms of credit due to the lack of any real collateral.

Also known as a "good faith loan" or "character loan".

BREAKING DOWN 'Signature Loan'

The lender will typically just look for a solid credit history and a source of income when deciding whether to issue a signature loan. A co-signer may be requested by the lender, but the co-signer would only be signing a promissory note, and would be called upon only in the event that the borrower is unable to repay the loan.

Interest rates on signature loans can run very high - even higher than credit cards. Borrowers should only choose this option when they are in great need and they have the income to repay the loan.

RELATED TERMS
  1. Character Loan

    A character loan is a type of unsecured loan that is made on ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Unsecured Loan

    A loan that is issued and supported only by the borrower's creditworthiness, ...
  4. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  5. Call Loan

    A loan provided to a brokerage firm and used to finance margin ...
  6. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
Related Articles
  1. Professionals

    Introduction To Loans

    Learn about the many types of loans and how they function in business.
  2. Credit & Loans

    Getting A Loan Without a Parent's Signature

    When you know what lenders are looking for, it’s quite possible to obtain a loan without your parents’ signature.
  3. Credit & Loans

    Why You’re Not Helping Your Credit Score by Getting a Co-Signer

    The dangers of co-signed loans are plentiful for those signing on as the well-established borrower with good credit. However, co-signed loans can get just as sticky for primary borrowers down ...
  4. Credit & Loans

    What are the Five C's of Credit?

    The five C’s of credit are what banks and other lenders evaluate about a potential borrower when making a lending decision. The five C’s are Character, Capacity, Capital, Collateral and Conditions. ...
  5. Credit & Loans

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  6. Credit & Loans

    How To Apply For a Personal Loan

    Learn about different avenues for applying for a personal loan, and learn valuable tips to help you get your personal loan application approved.
  7. Credit & Loans

    What Is Collateral?

    Collateral is property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup ...
  8. Credit & Loans

    Understanding Loans

    A loan is the act of giving money, property or other material goods to another party with the expectation of being repaid.
  9. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  10. Retirement

    Getting A Loan Without Your Parents

    Use the 5 "W"s to finance your dreams without banking on a second signature.
RELATED FAQS
  1. Can personal loans be transferred to another person?

    Learn whether it is possible to transfer a personal loan to another person, and find out what happens when you default on ... Read Answer >>
  2. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  3. What are the typical requirements to qualify for closed end credit?

    Learn what closed-end credit is, and the various requirements that borrowers must meet in order to obtain a closed-end credit ... Read Answer >>
  4. What is the difference between secured and unsecured debts?

    Learn the differences between secured and unsecured debt; discover how banks buffer risks associated with each type of loan ... Read Answer >>
  5. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  6. What is the most important "C" in the Five Cs of Credit?

    Learn how the five C's of credit affect new credit application decisions, and understand how a lender analyzes each aspect ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center