Consumers who are experiencing difficulty with their finances sometimes turn to signature loans for help. Signature loans can be an effective answer to debt problems, but they are not always the most economical solution. Unsecured signature loans are loans that are not backed by collateral such as a car, home or other personal property. They are referred to as "signature" loans because a consumer's signature is all that is required to back them. Unsecured loans are considered higher risk loans because there is nothing of value to offset the possibility that the consumer may default on repayment. The interest rates are considerably higher due to the increased risk and due to the fact that collecting on the money in the event of default is difficult and timely, if not impossible.

In most cases, acquiring an unsecured loan to consolidate debt is only economical for consumers who have very good credit that will enable them to qualify for a reasonable interest rate. Most likely, consumers who have a lot of debt or who have questionable credit will not be approved for unsecured loans at terms that benefit them. If they are approved, they will be offered the loan at a relatively high interest rate that does not offer reasonable savings in comparison to the interest rate on the bills that they are trying to consolidate. Due to the fact that the terms of repayment of unsecured loans are usually relatively short (usually 3-5 years) and interest rates are relatively high; payments on unsecured loans can be large and burdensome. When shopping for signature loans, consumers should compare interest rates and be sure that their monthly payment will comfortably fit into their budget.