Reasons People Take Out Signature Loans

shaking hands after agreeing a loan

At one point or another, anyone could find themselves short on cash. While some people may be able to borrow money from friends or family, others may not have that resource. One way that people are making ends meet is with signature loans.

What is a Signature Loan?

Those who have never had to borrow money before from a lending agency may not know what a signature loan is. This type of loan is known as a “good faith loan.” One resource for getting this type of loan is

Signature loans are a type of personal loan. Consumers often choose to use this type of loan because it does not require any collateral. Other types of loans may require a person using a car or a house as collateral for a loan.

What Can Funds from a Signature Loan Be Used For?

When a person takes out this type of loan, they can use the funds as they need. Certain loans can only be sued for specific purchases. For example, an automobile loan is only for the purchase of an automobile. With signature loans, there are no rules that say a person can only use this loan for specific items or needs.

Examples of things that people take out a signature loan for include household bills, medical services, groceries, or cash to make ends meet. Some people may need this type of loan for educational expenses, such as college tuition, books, or even for their children’s private school tuition. Others may have a medical emergency, and use the funds to cover doctor’s visits, ER visits, or medication.

Some people may use the funds to cover the mortgage, rent, or utilities. People who find themselves short on cash may even end up using their loan money for things like gas to get to work, or on groceries. There are endless reasons that people take out this type of loan, and again there are not any rules on what the funds may be spent on.

People can even use this type of loan on luxury items and vacations. This type of loan can make dreams come true. Some people may take out a signature loan so that they can go on their dream vacation or so that they can purchase the wedding gown of their dreams.

How Hard is it to Apply for a Signature Loan?

Qualifying for this type of loan does not require a long or drawn-out process. Many lenders are proud to let potential customers know that applying for this type of loan is quick, simple, and painless. The lender will need some basic information and will likely need to see the person’s state driver’s license or ID.

The lending company will need to verify the applicant’s identity. They may also ask for proof of employment. They may ask for paycheck stubs, a W2, or to see a copy of the person’s most recent tax return. It’s important to note that a lending company may need to check a person’s credit score or credit history.

While some companies may require a person to come in and apply in person, many companies are allowing people to apply for loans online. This means that a person can find out if they are pre-approved for a loan before ever leaving the house. This is very convenient for people who like to do things over the computer or on a smartphone.

It’s Smart to Build a History With a Lending Company

Once a borrower has established a loan history with a lender, they may not have to go through the entire process all over again for a new loan. Many times the lending company will not need to re-check the person’s credit report either. This is a benefit of sticking with one lender for personal and signature loans.

When paying back the original loan, the person who borrowed the money is building credit history with the lender. If the person ever needs to borrow money again, the lending company will be able to see if the person may their loan payments on time. This is why they may not need to run a person’s credit all over again. This is also a good reason for people to make their loan payments on time, so that the lender will let them borrow money again in the future.

Some Lending Companies Withdraw Loan Payments Automatically

Many people worry that they will take out a loan and then forget to make the payments on time. An easy fix for this is to choose a loan company that will automatically draft the payment straight out of the person’s checking account. The dates of the automatic drafts will be listed in the loan contract. The person just needs to make sure they have the repayment funds available in their checking account on those dates.

It’s also important to note that unless the loan amount was tiny, the person borrowing the funds will not have to pay the entire loan back in one lump sum. The lender will set up repayment terms for the loan. This means that a person may have several months to pay back larger loans, instead of having to pay the loan back in full the very next month.

Signature Loans are Fast, Easy, and Can Be Spent as Needed

Those that find themselves in a bind and needing money may be able to get the funds they need from a signature loan. People can also apply for this type of loan to pay for luxury items and vacations. This type of loan is easy to apply for, and does not require any sort of collateral.

Again, many companies now allow people to apply for this type of loan online, so a person knows before they leave the house if they are approved or not. There may be a few basic items needed to prove identity and income, but most people have these items sitting around. After paying back the loan to the lender, the borrower then has a history with the lender and may be able to apply for larger loans.