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The Key Differences in 1st Lien, Signature and Personal Loans

In everyday life, there are a variety of ways people can get loans when in a pinch. The most common options include a loan with a first lien, a signature loan and a personal loan. For the benefit of anyone that might have an interest, here is a comparison of these three loan types.


First Lien: Requires some form of collateral. It could be in the form of a car, house or any other assets with real value that’s equal to or higher than the amount of the loan.

Signature: No collateral required.

Personal: No Collateral Required.

Repayment of the Loan

First Lien: Generally, first lien loans can extend out from one to five years. In the case of a mortgage, it could go out as far 30 years with a conventional loan.

Signature: This type of loan is short-term by nature. While most of them carry a 30-day term with one payment, it is possible to negotiate a signature loan that extends out 60 or 90 days with monthly payments available.

Personal: These are very short-term loans with PayDay loans representing a majority of what’s available to consumers. The payment is usually due in two weeks or less, though some PayDay loan companies might be willing to extend the due date out as far as 30 days.

Credit Check Requirements

First Lien: Generally, borrowers are required to have a credit score rating in the good/excellent range. As an interesting side note, there is a possibility of securing this type of loan with a bad credit score if the value of the collateral is sufficient enough to offset the additional risk to the lender.

Signature: With nothing more than a person’s signature securing this type of loan, the borrower is usually required to have a credit score in the excellent category.

Personal: One’s credit score is usually of very little consequence when applying for a short-term personal loan. In fact, most Payday loan companies advertise there will be no credit check.

Applicable Interest Rate

First Lien: With good to excellent credit, the borrower can usually secure a loan with low market rates. If any issues crop up, the interest rate might be increased slightly, but never much above market rates.

Signature: With good/excellent credit or a cosigner, the rates on this type of loan are moderate. If the credit is less the perfect, the interest rate might be increased to reflect the risk.

Personal: With no credit check or collateral, personal loans carry extremely prohibitive interest rates.

Through the comparison process, it should be easy to identify the key differences between these types of loans. At the end of the day, first lien loans work best for people with assets, signature loans work for people with excellent credit and a sort-term need and personal loans are usually extended to people facing an emergency situation.