While you might or may not be quite familiar with them, the signature loans are common than you could imagine. If you go to a store that provides in-house financing, you will most probably find this product from their list of lending packages. Similarly, if you have received an offer through an email offering you the opportunity to consolidate your outstanding debts through a fixed interest loan facility within a fixed number of monthly repayments, then most probably, it is a signature loan.
One thing with signature loans is that they are unsecured and you do not have to place collateral to be approved of the credit facility. But since they are unsecured, they are likely to be difficult to obtain. Lenders demand that the applicants provide prove of their ability to repay or their creditworthiness.
It is essential that you first understand what it takes to borrow the loans before you even sign that promissory note that obligates you to settle the credit facility as agreed upon in the contract. For one, taking an unsecured signature loan may not be the same thing as use of the credit card. Nonetheless, the amount that is borrowed through this credit facility usually goes towards financing one specific project or financial need and then paid off in equal monthly installments.
One good thing about the loans is that you can be granted larger amount of money that you can use to do major projects such a home improvement or payment of tuition fees. If you are in need of cash and for that matter, a large amount of loan, you could opt for these loans. However, you need to understand that because they are unsecured, you will have to meet higher cost of interest rates though not the same as those of credit card debts.
These loans are also offered by appliance stores, and furniture stores as one way of encouraging their customers to purchase their products and goods and then pay the amount over time. Besides, it is common for credit unions and banks to offer the same credit facilities. When it comes to unsecured signature loans, there are pros or benefits you can get them from.
First, they are can be used as a reasonable way of consolidating those high variable interest rates associated with credit cards by obtaining one fixed monthly repayment loan that has more attractive interest rates. Secondly, the loans sometimes allow the borrowers to be able to participate in special promotional deals that are offered by retail stores.
When compared to short-term loans like payday, the interest rates of the signature loans are much better. While the loans can benefit consumers in a number of ways, it also pays to take heed of the cons of these credit facilities.
Although the interest rates might be competitive compared to those of similar loans and credit card debts, the fact is that they are still more expensive than the secured loans like auto loans and home equity loans. Due to your credit history, you may not benefit from the best available interest rates. The loans may make it easy for you to get too deep and too fast with the credit facility.