Signature Loans

What is a “Signature Loan”?
Most of us are familiar with borrowing money for a major purchase such as a car or house. As part of the loan agreement on these forms of loans, we typically use the item we’re purchasing as the collateral on the loan. When we talk about collateral (or using the car or house as “security” on the loan), we agree that if we can’t pay for the loan, the Credit Union will become the owner of the item. In this way, the Credit Union has an alternative means of recovering all-or-most of the money loaned out by re-selling the item. Collateral is a means of reducing the risk the Credit Union takes in loaning out the money.

Occasionally in our lives come circumstances where we need some money quickly but don’t have any form of collateral to offer to secure the loan. When security can’t be placed on a loan, our Credit Union offers a form of un-secured loan called a “Signature Loan.” As the name implies, the member literally uses his/her signature and good name as the “collateral” on the loan.

Signature can be used for all kinds of things. People get them for everything from antique desks to engagement rings. Some have family emergencies requiring money for medical situations or to buy plane tickets.

Signature Loan Guidelines
As with other loans, there are guidelines we follow with signature loans. They are:

1. Each member is limited to a certain amount in signature loans. In a household where each spouse is a member of the Credit Union, each can borrow up to the limit. This limit is not for a single loan, but it is for all un-secured loans you have with us. For example, if you have a $3,000 signature loan with us, then you would be limited on a separate signature loan; your spouse (if a member) can also borrow up to the limit separately. These limits are as follows:
   1. Member less than 2 years regardless of credit score: $5000.
   2. Credit Scores 651+ : $10,000.
   3. Credit Scores 551-650 : $7,500
   4. Credit Scores 550- : $7,500 with Credit Committee and Board Approval.
2. VISA Card Credit Limit. If you have a Freedom Community Credit Union VISA, the credit limit on the card is part of your signature loan limit. That is, if you have a $5,000 credit limit on your VISA, then you can’t borrow more than $5,000 on a signature loan. The VISA card is, for all intents and purposes, an open, pre-approved signature loan.
3. No Automatic Approval. Depending on circumstances surrounding the loan, like the member’s payment history (both with us and other creditors), the circumstances surrounding the loan request, ability to re-pay, etc. the member may-or-may not be approved up to the $10,000 limit, we may opt to limit the signature loan to a level more consistent with the member’s payment history.
4. Privacy. Finally, you don’t have to provide us with a reason for a signature loan. Though this sometimes helps in the approval process (in borderline cases), members don’t have to provide us with the circumstances for needing the loan.
5. Re-payment Options. Signature loans can be repaid as a single-payment note due at a specific date (say, 30-, 60- or 90-days out) or can be set up on a monthly payment schedule as with other loans.