A signature loan is a kind of personal loan or unsecured loan that is provided by lenders when the loan applicant gives his or her signature as an assurance that they will repay the loan without fail within a specific timeline. This signature of the loan applicant will serve as the sole collateral for the loan application. The borrower does not have to give any other form of security or collateral in order to procure this loan. The advantage of a signature loan is that one can apply for it for any reason. As a borrower, you will not have to specify the reason for taking a loan to your lender.
A signature loan is sometimes called as a character loan or a good faith loan as it is offered solely on the basis of the borrower’s reliability and creditworthiness. The characteristics of signature loans are very similar to that of personal loans. You can get a signature loan from a bank or a non-banking financial corporation (NBFC) only if you prove to them that you will be able to repay the loan.
Some lenders allow even e-signatures or digital signatures or online signatures for signature loan approvals. This is more common in countries like the United States. In India, signature loans are not too commonly available. You might find lenders after doing proper research.
When you approach a lender for a signature loan, the lender will check and evaluate your income, your employment status, your credit history, your bankruptcy history, and your credit score provided by CIBIL. If you have a high credit score, an impressive credit history, and a good monthly income, then a lender will accept your signature loan application.
There are some lenders who may ask the borrower to make arrangements for a co-signer. This co-signer will be required to sign a promissory note and nothing else. In case the actual borrower misses any installment deadline or goes on to default the loan payment, then the lender will get in touch with the co-signer, where the co-signer will also be held responsible.
To apply for a signature loan in India, you should mandatorily submit certain documents for providing proof.
When you take a signature loan, you will need to pay certain fees and charges for enjoying the benefits of the loan. The common fees include processing fee, late payment fee, special service request fee, cheque bounce fee, etc.
You can apply for a signature loan and use it for numerous purposes and some of them include:
You can apply for signature loans offline or online. To apply offline, you can visit the branch of any bank or NBFC and meet a branch representative for assistance. You can submit the required documents in person and complete your loan application. To apply online, you can visit official websites of lenders or third-party lenders. Do compare fees and interest rates associated with each of the loan options. You can make comparisons and then pick the most suitable one.
Since there is no need for submitting a collateral and since the documentation process is so simple, a signature loan is a great idea for multiple financial needs. Moreover, it is provided by a lender if you show yourself as a financially responsible and trustworthy borrower.
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