A signature loan, also called a “good faith loan” or “character loan,” is a type of personal loan that is granted solely based on the borrower’s creditworthiness and promise to repay.
Unlike secured loans, it requires no physical collateral, the borrower’s signature alone serves as the guarantee. These loans are typically offered by banks, credit unions, or online lenders and are often used for purposes like debt consolidation, emergencies, or large purchases.
Because there is no collateral involved, interest rates on signature loans are generally higher than those on secured loans. Approval usually depends on the borrower’s credit score, income, and overall financial history.