Signature Loan

AAA

DEFINITION of 'Signature Loan'

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".


INVESTOPEDIA EXPLAINS '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. Countersignature

    An additional signature on a document that has already been signed. ...
  3. Personal Income

    Total compensation received by an individual. Personal income ...
  4. Home Equity Line Of Credit - HELOC

    A line of credit extended to a homeowner that uses the borrower's ...
  5. Credit Card

    A card issued by a financial company giving the holder an option ...
  6. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
Related Articles
  1. What are the main categories of debt?
    Credit & Loans

    What are the main categories of debt?

  2. Should You Borrow From Your Retirement ...
    Retirement

    Should You Borrow From Your Retirement ...

  3. Forces Behind Interest Rates
    Economics

    Forces Behind Interest Rates

  4. Getting A Loan Without Your Parents
    Retirement

    Getting A Loan Without Your Parents

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center