Signature loans are loans that are originated for people with good credit. Before the invention of credit cards, small loans were granted to people by relying on their character instead of requiring any capital. The times have shown that those with bad credit are also in need of loans and financial institutions established the programs of providing bad credit signature loans.
Bad credit signature loans are loans that are offered to individuals with less than stellar credit who are unable to offer collateral to be approved for a secured loan. Being that the borrower is not offering any sort of collateral, the bank accepts that person’s signature as a promise that he or she will repay the loan in a set period of time with specified interest rate. The term of the loan can last from a couple of months to a couple of years before the complete repayment is due.
Bad credit signature loans can be used for a variety of reasons: holiday gifts, home improvement, business needs, student loans, wedding arrangements and even holiday gifts.
Many people are uncertain of what their current credit score is. If your credit score is below 500, that is considered a bad credit score. Some lenders even consider between 550-600 as not very good credit. It is important to keep track of your credit score. Before applying or a loan with your credit union or lending institution, it is a good idea to request your credit score to view before the banks pull it for themselves.
Advantages Of Bad Credit Signature Loans
Since credit cards have hit the scene, banks and other lending institutions started to push the use of credit cards instead of issuing signature loans because they can charge higher interest rates which makes them more money. Even though bad credit signature loans are not encouraged by the banks, they are better for you. The loans require monthly scheduled payments which allow you to repay the money borrowed in a timely manner. This also helps you avoid excessive interest fees. The interest rates on these loans are much more reasonable than those of a credit card.
What To Look For
Credit unions are a great place to request a bad credit signature loan. Credit unions are usually more reasonable to work with and often have better rates than most lending institutions. If the loan requested is for a minimal amount the credit union will usually provide an unsecured loan but if several thousand dollars are needed, the credit union may request collateral if your credit is questionable.
Even though your credit might be shaky, you are not obligated to accept the loan being offered by the bank or credit union. Check the terms to make sure they seem reasonable and that the total cost of the loan seems low. If the fees seem excessive, try another institution.
Being approved for a bad credit signature loan generally is based on your credit history and your ability to repay loans. It helps if you have repaid unsecured credit in the past and is current on paying any of your other bills.