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Understanding Unsecured Signature Loans

A consumer guide to the benefits and risks associated with signature loan programs.

While you may or may not be immediately familiar with them, unsecured signature loans are more common than you might imagine. Ever go to a store that offers in-house financing on the products they sell? Chances are, that is an unsecured loan. Ever receive an offer in the mail to consolidate your outstanding debts at a fixed interest rate over a fixed number of monthly payments? Again - that is probably a signature loan.

What Exactly Are Unsecured Signature Loans?

Unsecured signature loans are usually fixed interest rate loans offered to borrowers who are able to meet the specific credit standards required by the lender. Because they are unsecured, or in other words, there is no collateral offered against the money borrowed, lenders are generally selective of whom they will lend money to with signature loans. While the length of time allowed to pay back an unsecured signature loan varies from lender to lender, typical terms are 60 months (five years) or less.

Why Use Signature Loans?

In many ways, taking out an unsecured signature loan is a lot like using a credit card. However, the amount borrowed is generally applied towards one specific purchase and then paid off with a pre-specified number of equal monthly payments. Signature loans are frequently offered by furniture stores and appliance stores to encourage their customers to purchase their goods and pay them off over time. However, it is also common for credit unions and other lending institutions to lend money via an unsecured signature loan for whatever purpose the borrower chooses - it could be for an unexpected household repair, college expenses, consolidating other debts, or even taking a vacation.

A Few Pros When It Comes To Unsecured Signature Loans

They can be a reasonable way to consolidate high variable interest rate credit card debt into one fixed monthly payment at a more attractive rate.
They sometimes allow borrowers to participate in special promotional financing deals offered on occasion by retail stores - offers such as zero percent interest for year, etc.
Compared to payday loans, the interest rates offered on signature loans are considerably better.

It Also Pays to Beware Of The Cons

While interest rates are usually competitive when compared to credit cards and similar loans, they are still more expensive than secured loans such as home equity loans or auto loans.
Depending on your credit history, the best rate for an unsecured signature loan might not be available to you.
It is easy to get in too deep, too fast with signature loans.

Call GFM For More Assistance

If you have any questions or concerns about signature loans, just give us a ring and we'll do our very best to help make the process as clear as possible. While we don't offer unsecured loans, we can give expert advice when it comes to whether or not they are a good idea in your unique situation. Also, if you're having financial trouble due to unsecured signature loans or any other kind of debt, GFM is ready to help you find relief as quickly as possible. Call us today 1.866.467.1259.