What is a signature loan?

Discover what a signature loan is and how it differs from other types of loans. Learn about its unique characteristics, including its reliance on a borrower's signature as the primary form of guarantee.
Personal Loan
3 min
23-April-2024

In the landscape of personal finance, various loan options cater to diverse needs and preferences. Among them, the signature loan stands out as a versatile solution for those seeking financial flexibility. In this article, we explore the intricacies of signature loans, shedding light on how they differ from traditional personal loans and why Bajaj Finance is your go-to partner for securing hassle-free personal financing.

What is signature loan?

A signature loan, also known as a character loan or good faith loan, is a type of unsecured personal loan that relies solely on the borrower's signature as a promise to repay the loan. Unlike secured loans that require collateral, such as a house or car, signature loans are approved based on the borrower's creditworthiness and financial stability. These loans offer borrowers the freedom to use the funds for various purposes, including consolidating debt, covering unexpected expenses, or pursuing personal projects.

How does a signature loan work?

The process of obtaining a signature loan is straightforward. Borrowers apply for the loan with a lender, providing details of their income, employment status, and credit history. Lenders assess the borrower's creditworthiness and determine the loan amount and interest rate accordingly. Once approved, the borrower signs a promissory note agreeing to repay the loan in fixed installments over a specified period. Signature loans typically offer fixed interest rates and repayment terms, providing predictability and stability for borrowers.

Is a signature loan different from a personal loan?

While signature loans fall under the umbrella of personal loans, they have distinct characteristics that set them apart.

  • Approval criteria:
    Personal loans may have more varied approval criteria. They can consider factors such as credit score, income, and debt-to-income ratio. Signature loans typically rely heavily on the borrower's creditworthiness, as there's no collateral to mitigate the lender's risk.
  • Loan amounts:
    Personal loans generally offer higher loan amounts compared to signature loans. This is because personal loans can be secured, allowing lenders to offer larger sums based on the value of the collateral.
  • Interest rates:
    Interest rates can vary for both types of loans based on factors like creditworthiness and market conditions. However, personal loan interest rates may sometimes be lower than signature loans.

In summary, while both types of loans are unsecured forms of borrowing, the key differences lie in collateral requirements, approval criteria, loan amounts, and interest rates.

Why a Bajaj Finserv Personal Loan is better than a signature loan?

While signature loans offer flexibility and convenience, traditional personal loans have their advantages. Personal loans, including those offered by Bajaj Finance, may provide lower interest rates and higher loan amounts compared to signature loans. Additionally, they often come with a range of personal loan features and benefits, such as flexible repayment options, quick disbursal, and dedicated customer support, making them an attractive choice for borrowers seeking comprehensive financial solutions.

Conclusion

In conclusion, signature loans offer a convenient way to access funds without collateral, relying on the borrower's creditworthiness and signature as a guarantee of repayment. However, when considering personal financing options, it's essential to weigh the benefits and features offered by different lenders. With Bajaj Finance Limited, you can enjoy competitive interest rates, flexible repayment terms, and simple personal loan application process, making it the ideal choice for fulfilling your financial needs.

Apply for a Bajaj Finserv Personal Loan for a seamless and rewarding personal loan experience.

Disclaimer

While care is taken to update the information, products, and services included in or available on our website and related platforms/ websites, there may be inadvertent inaccuracies or typographical errors or delays in updating the information. The material contained in this site, and on associated web pages, is for reference and general information purpose and the details mentioned in the respective product/ service document shall prevail in case of any inconsistency. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/ service document and applicable terms and conditions. In case any inconsistencies are observed, please click on reach us.

*Terms and conditions apply

Frequently asked questions

What is a signed loan?
A signed loan, also known as a signature loan, is a type of unsecured personal loan where the borrower's signature serves as the primary form of guarantee for repayment.
What is the limit for a signature loan?
The limit for a signature loan varies depending on the lender, borrower's creditworthiness, and other factors, typically ranging from a few thousand to several lakhs in rupees.
Show More Show Less