Personal Signature Loan

Personal signature loans are granted to borrowers by a lending institution, such as a bank or credit union, that allows the signature of the borrower and their word, or promise, of repayment to secure the agreement. A personal signature loan is only granted to borrowers with an exceptional credit history and can prove that they can effectively manage debt. Managing debt includes the use of credit as a tool and repaying the credit in a reasonable amount of time. It is not necessary to have zero debt, but that the existing debt shows no signs of default, and is not larger than 20% of the borrowers credit limit.

A credit limit and a personal signature loan limit are determined by the borrower's income and expense ratio. Each lending institution has its own calculation for determining the income to expense ratio. Geographic location also plays a factor in this calculation. For example: a borrower living in California may have a higher income to expense ratio because the cost of living is higher in California than anywhere else. When applying, the lender may approve the California borrower, but deny a borrower from another state with the same ratio. Personal signature loans have different calculations for income/expense ratios in different locations.

Loans based on an individuals signature are primarily used for educational expenses, vacations or smaller luxury items. Larger items, appliances, automobiles, and home repairs are typically not paid for with a personal signature loan, as the rates for these are much higher than larger item specific loans. The interest rate range on personal signature loans are determined in part by the federal government, and partly by the borrower's FICO score. If the borrower has a lower FICO score (although not very low, otherwise they will be denied), they will receive a higher interest rate. If the borrower has an exceptionally high FICO score, the interest rate will be lower.

It is recommended that all borrowers obtain copies of their credit reports before making application for any personal signature loans. This will enable a borrower to view their report for any inaccuracies which may be lowering their score and mandating a lower personal signature loan interest rate. This type of funding will provide a borrower with monetary funds to be spent as they wish. Pledging to spend this money wisely and in moderation should be the goal of a Christian borrower. The Bible says in Philippians 4:5 "Let your moderation be known unto all men. The Lord is at hand".

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