Signature Loans - What's Their Downside?

When you take out a signature loan, your signature secures your loan instead of collateral. Your getting cash, without having to run the risk of losing your personal property. Whether or not you get approved for your financing request is going to depend on your credit history as well as several key variables including but not limited to your debt, income, employment history and residence history. Even if you are an individual with bad credit, we can assist you with your signature loan request.

When compared to secured loans signature loans do have some risks associated with them.

Higher Interest Rates
Even for people with excellent credit, signature loans are considered more risky by lenders since there is no collateral securing the loan. As a result, interest rates are higher for signature loans than they are for secured. And with higher interest rates, you will end up paying more money for your loan over the life of the loan. You can off-set the interest cost by utilizing a shorter term loan. However, be prepared to pay more every month as a result.

Terms
Since signature loans are considered higher risk, their loan terms are not as favorable. Although our lenders do not charge any early payoff fees, much of our competition do. In addition, signature loans do not have as advantageous grace periods. With a secured loan you can miss two payments or more before your account hits collections. However, one can expect their account to be negatively impacted even after they miss one payment. Our lenders also will not adjust rates once the loan is in action, but just like with a credit card, some lenders will increase your rate if you are late with a payment.

Your Credit
Your account activity with a signature loan can have a very positive or negative impact on your credit. Not missing any payments and paying timely for the duration of your signature loan will equate to a dramatic increase of your credit rating and score. On the flip side, even missing one payment will have a negative impact. And if you default on your signature loan, your credit will be crushed and you may even be forced into bankruptcy to pay the creditor back. Therefore, don't borrow more than you can afford. Before you apply for a signature loan on any site, you should utilize our loan calculator to determine what you can afford as your monthly commitment. Also, try and develop an emergency fund specific for making a month's worth of payments for your loan. This extra money will really help out if something comes up that puts a strain on your wallet one month.