An unsecured signature loan is the same as an unsecured personal loan based on your good name. There is no collateral backing up the financing, so you have put nothing at risk when your borrowed the money, except for your good name. Yet, the lender has everything to lose because you have not given them possession of anything of value to hold until you repay the loan. That is why many financial institutions will look at your credit score before loaning you an unsecured loan.

However, when an unsecured loan that is not backed by collateral, AKA signature loan or personal loan is granted, it does not necessarily have to be based on a credit score. For example, if your friend loans you money without any collateral, meaning something of worth that can be repossessed if the loan isn't repaid, then your credit score has zero to do with it, but rather the value of your friendship is at stake. Therefore the real meaning of an unsecured loan is that it is not backed by any object of value and is loaned to you based on your good name. For financial institutional purposes, they may want to look at your credit score because they are not your friend and it is strictly a business transaction, therefore your good name may be associated with your historical payment history on prior debt, reflecting in your credit score. There are three types of unsecured loans. First there is a personal unsecured loan, meaning a loan that you individually are responsible for the repayment of, second is an unsecured business loan which leaves the business responsible for the repayment, and finally there is an unsecured business loan with a personal guarantee. With the latter, although the borrower is the business, you as an individual will be the payer of last resort if the business defaults on the loan. For more information read: Signature Only Personal Loans & Signature Loan Application.

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