Tips When Looking for Signature Loans.
A signature loan is also referred to as a personal loan. Personal loans only requires the applicants signature as collateral for the loan. The interest charged is relatively high as the financial institution relies on the applicants signature as a promise that the loan will be paid. Before the borrower has his or her loan approved, the lender checks the credit history of the borrower. The lender approves loans for those with great credit history and a stable source of income. he good thing with signature loan is that the borrower can use it for medical purposes, holiday etc. The process of applying is easy as it only demands the borrower fills a form and end to the lender. Below is a discussion of some of the advantages of signature loans.
The loan is unsecured and only requires the applicant to append his or her signature. With other types of loans, the applicant will need collateral such as land, house, and several others. Low income earners can access the signature loans as they do not have the fixed assets required when borrowing a loan.
The loan helps the borrower sort emergency cases as it is processed fast as compared to other loans. Personal loans are processed faster as compared to other types of loans since the applicant does not require to provide any documents or assets. No time is taken in verifying the documents and forms. It also takes less time to disburse the loan to the borrower.
It does not require the applicant to disclose the purpose of the loan during application. With other loans, the borrower indicates the purpose of borrowing, and further, use the same cash to fulfill that purpose. An example of such cases includes car loans where the applicant will be required to purchase a vehicle and produce proof, therefore cannot divert the money into on other uses.
Personal loans allows the borrower to redirect it to other matters that requires money urgently. Since the borrower is not required to attach any asset, the risks to the borrower are minimal. In this case, the borrower does not lose anything when he or she defaults to pay. In case the lender sues the borrower, he or she will only be declared bankrupt as there was no asset attached to the loan.
Signature loans have their cons as highlighted below.
Signature loans attracts high interest rates. High rates are charges because the loan has no collateral. The borrower does not get a chance of paying the loan in parts. Signature loans have a shorter repayment period since there is no collateral. Since the repayment periods is shorter, the monthly deductions are high. Many borrowers ends up defaulting their loans because of the high installments.