Required

What Is a Personal Loan, Unsecured Loan, or Signature Loan?

Written by:
Gina Freeman
Edited by:
Kristin Marino verified

There are many financing options for consumers who want to borrow money and two main lending categories: secured and unsecured debt. What are personal loans? They are unsecured financing and have several names:

These terms all refer to the same type of borrowing.

Find personal loans, unsecured loans and signature loans

Secured loans

Secured loans are those that require borrowers to pledge something of value that the lender can take if the borrower fails to repay the loan. This item is called “collateral.”

Often, the collateral is the item being financed. For example, if you take out a mortgage to purchase your home, the home itself serves as the collateral. The lender can foreclose, evict you and sell the house if you fail to make your payments. Similarly, an auto loan is generally secured by the car it finances.

Unsecured loans

Unsecured loans have no collateral for the lender to recover if you fail to repay them. So unsecured loan rates are higher than secured loan rates. The lender’s main form of security is your good word — your personal promise to repay.

What is a signature loan? It’s just another name for personal loan or unsecured loan, and it’s guaranteed by your signature. Most unsecured loans have shorter durations than secured loans. While you can get a mortgage for 30 years, personal loans typically have terms ranging between one and five years.

Unsecured loans come in four common forms:

  • Signature loans provide a lump sum that you repay in monthly installments. Interest rates are generally fixed, and you can use the money for any purpose. The terms “personal loan” and “signature loan” are often used interchangeably. While signature/personal loans can be found in amounts ranging between $1,000 and $100,000, the most popular sources offer a range between $5,000 and $35,000.
  • Personal lines of credit are also unsecured. However, unlike a personal loan or signature loan, these accounts are open-ended. Your lender approves a specific maximum amount of credit, and you are free to draw any amount up to your limit. The lender bases your monthly payment on the amount of credit used and your interest rate. Your interest rate can be fixed or variable.
  • Credit cards are similar to personal lines of credit in that you can use and re-use them as long as you make your monthly payments.
  • Student loans are technically unsecured. That’s because even though you use them to acquire an education, the lender can’t repossess your degree if you default.

Related: How to get a personal loan with a low credit score

Sources of personal, unsecured and signature loans

There are many types and sources of Personal loans; six common sources include:

  1. Your local bank. If you have terrific credit and a good relationship with your local bank, you might get a signature loan within hours.
  2. Online banks. If you want to be sure you are accessing the lowest possible interest rate, you may begin your search for a personal loan online, comparing offerings from various lenders to determine the most attractive rates and terms. This can be especially important if your credit is not well-established or “less than terrific” as terms can vary significantly.
  3. Peer-to-peer sites. These are popular sources of personal loans. In most cases, these loans come with fixed interest rates and payments.
  4. Student loans. You can only use student loans for education-related costs. However, student loans also carry benefits that other loans do not – like the ability to defer them until graduation, a choice of flexible repayment options and in some cases the opportunity to have them forgiven – if, for example, you get a teaching degree and agree to teach in an at-risk district. Your school’s financial aid office is a great place to start your search.
  5. Credit cards. These accounts are widely available and heavily-promoted. Be cautious about offers you receive by mail, online, and on the backs of buses. Sign-up bonuses and welcome offers can be enticing, but be clear on the ongoing terms after any welcome period.
  6. Personal lines of credit. Review the fine print carefully because the terms can be complicated – especially if your interest rate is variable.

Personal loans and your credit

Because lenders rely almost entirely on your word for repayment, your credit rating is more important when you apply for a personal loan than it is when you apply for secured financing.

Using FICO’s Credit Score Calculator, as of this writing, you can see a credit score’s impact on interest rates when comparing mortgage rates and personal loan rates for two consumers – one with excellent credit and one with fair credit.


That difference of over 5 percent between personal loan borrowers is significant, while the mortgage rate impact is minimal.

Shopping for personal loans

How hard is it to get a signature loan? That depends on your credit and income. Solid applicants can receive their money in just hours and pay low interest rates. Unsecured personal loan rates rates vary widely. For instance, while the best deal listed for a consumer with a 660 FICO score may be 12.76 percent, other lenders advertise rates above 23 percent!

This is why it’s so important to shop carefully for personal loans. Mortgage rates, on the other hand, typically vary between .25 to .50 percent among lenders on a given day for the same borrower.

Related: Personal loans beat credit cards for large purchases

Can lenders force you to pay an unsecured personal loan?

When you fail to repay a secured loan, the lender can repossess the collateral. If you default on your auto loan, you may eventually look in your garage and find it empty. Ignore your mortgage lender’s pleas for payment? Don’t be surprised when a “foreclosure sale” sign goes up in your yard.

But what about unsecured creditors? Can you really just walk away?

Not likely. Unsecured lenders have four common solutions when borrowers default:

  1. Turn accounts over to a collection agency.
  2. Sell debt and let the new creditor try to collect.
  3. Report bad payment history to credit bureaus, making it harder for consumers to borrow in the future – and possibly impact the ability to buy insurance or get a job.
  4. Unsecured creditors can also sue you, obtain a judgment, and use that to garnish your wages, place a lien against your home, or force you into bankruptcy in some cases.

There are many great reasons to apply for a personal loan, but you do have to pay it back.

Find personal loans from $1,000 to $100,000 

Get matched to your perfect loan and level up your money game.
Find My Loan
Popular Posts

Related Content

Can You Avoid Personal Loan Fees?
Loan FAQs | May 19, 2022
Compare personal loan fees charged by some of the most popular lenders. Learn how to avoid fees charged by personal loan companies.
What Is a Personal Loan Joint Account?
Loan FAQs | April 28, 2022
A co-applicant or co-signer could help you get approved for a personal loan when you can't get approved on your own. Learn how it works.
How Long Does It Take to Pay Off a Personal Loan?
Loan FAQs | August 31, 2022
The pay-off period for a personal loan varies, typically 1-7 years. It depends on the terms of your loan agreement, including the interest rate and loan amount.
What’s the Largest Personal Loan I Can Get?
Loan FAQs | July 13, 2022
Large personal loans can be a good way to borrow a large amount of money for home improvement or debt consolidation. Compare loans and find the best large personal loans.
How Can I Manage My Personal Loan Responsibly?
Loan FAQs | September 6, 2022
We simplify personal loan management for you. Gain valuable insights on controlling your debt with our expert advice on personal loan management. Learn more.
Best Personal Loans with No Origination Fees for 2025
Loan FAQs | September 21, 2022
Origination fees are common among lenders, but you may be able to avoid them. Learn about potential loans that have no origination fees, compare rates, and choose your personal loan.

Ready to up your money game?

See my loan options
Why AmONE is Trusted By Millions for Their Loan Needs

Anyone can put together a group of lenders in a marketplace to offer people loans. We go beyond that. We not only partner with some of the best lenders around (like Citi, Rocket Loans, SoFi and so many more), we also work with partners who can help people like you go beyond a one-time loan. We connect you with the money programs you need to help you get real financial solutions in place that allow you to tackle your debt and money problems so you can move forward. Getting out from under debt to financial freedom is daunting and we're ready to help you every step of the way.

AI is the hottest thing around right now, but we know from our decades of experience in the personal finance space that the last thing someone wants to do is talk to a robot when they need real answers. Solving money problems can be stressful and daunting, so don't settle for generic responses and information that offers little real financial insights. Speak to one of our many support specialists who all work from an AmONE office right here in the U.S. and get the answers you really need to make better financial decisions.

We work hard to find loan offers for even the most challenging financial situations. With our large lender marketplace, we know we give everyone the best shot at getting the loan, debt and credit help they're hoping to find. Even when someone's credit is clearly poor or they hold a large amount of debt, we still get our customers in front of lenders to give them the best shot at securing the funds they need. When the unexpected happens and customers are rejected for loans, we still work with them to find other financial solutions that put them on the path to financial recovery so they can keep moving forward toward their money goals.

Anyone can put together a group of lenders in a marketplace to offer people loans. We go beyond that. We not only partner with some of the best lenders around (like Citi, Rocket Loans, SoFi and so many more), we also work with partners who can help people like you go beyond a one-time loan. We connect you with the money programs you need to help you get real financial solutions in place that allow you to tackle your debt and money problems so you can move forward. Getting out from under debt to financial freedom is daunting and we're ready to help you every step of the way.

handicon
Matched with Lenders Who Fit Your Needs

Tell us your situation and we will match you instantly to financial solutions that are right for you.

shieldicon
Get Offers from Only Highly Rated Providers

We work with only the highest-rated partners that provide the best chance to get you the loan you need for your situation.

supporticon
Easy Access to Live Support Based in the U.S.

Get live support when you need it most, through email or phone, and have your questions answered fast.