Getting a loan can be tough when credit markets dry up. In these tough economic times, fewer lenders are willing to offer financing to individuals and small businesses. The amount of credit that people have is being diminished as many credit card companies have been decreased the limits that they are offering to their members. If you need cash, one option that you may not be aware of is the signature loan.

Signature loans are unsecured debt obligations that lenders make available. However, since these types of loans are not secured by any collateral, they tend to be more expensive than typical loans that are collateralized. This is especially true for those people who have a bad credit history. Lenders have become extremely selective as to who they are willing to loan money to. People with very poor FICO scores will find it very hard to get a loan. And if they are able to obtain financing, they will likely have to pay a significant interest for this privilege.

If you need a loan, there are several key points that you need to consider.

Lenders always want to know your credit score. Your credit score, also known as your FICO score, is a key determinant of your borrowing requests. The higher your FICO score, the more likely you will be to obtain a loan, and a reasonable interest rate.

Since signature loans are not secured by any collateral, the lenders want to know who the borrower is. Start your quest for a signature loan with your bank. Along with your FICO score information, these lenders will have a good understanding as to your cash flow situation and your ability to repay your debts.

Signature loans are considered to be higher risk debts than other loans. Loans that are deemed to be high-risk loans tend to be more expensive. These expenses are usually loan initiation fees and above average interest rates. The interest rates on unsecured signature loans can be exorbitant. Sometimes, the interest rate on these types of loans exceeds that which you would pay on your credit card.

Don’t forget to consider the fees and interest that you will have to pay when you borrow money. When making your borrowing decisions, especially for loans with bad credit, weigh these expenses carefully. Make certain that the overall expense is worth your while. If you are unable to repay your loan, you will further adversely impact your credit rating.

If you are able to be able to get a signature loan, the likelihood is that the repayment period for the loan will be very short Sometimes, these loans are for people just trying to make ends meet until their next payday. As such, these loans may be for 30 days or less. Typically, as with interest rate, the better one’s FICO score, the more time you will have to repay the loan.

Lending institutions want to have a good sense that the borrower will have the wherewithal to repay the loan. So, along with one’s FICO score, lenders also have other metrics that they use when considering whether or not to make a loan. Those lendering money will consider a potential how much debt a borrower currently has as compared with their income level. Lenders like to see this ratio of debt to income below 35%. A low ratio means a better chance of getting a loan. A simple rule of thumb is that your outstanding debt should be no more than one third of your annual income.

If you are in need of cash, signature loans may be your best option. However, as with anything, be careful about whom you deal with. Try to limit your dealings to well known, reputable lenders. When considering a lender, consult your local Better Business Bureau to see the lender’s reputation.

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