Acquiring any type of loan can be challenging, especially when you don’t meet the desired requirements, i.e., you probably have poor credit scores, limited financial resources, bad credit scores, or you’re a student looking to borrow a loan.
However, you’ll find that most financial institutions will only consider loan applicants with suitable credit scores and eligibility requirements. They’re not willing to risk lending money to unsuitable parties or loan applicants without a guarantee or collateral. Under such circumstances, a guaranteed loan may be the solution you’re looking for.
What Is a Guaranteed Loan?
As the name suggests, a guaranteed loan refers to a loan that has the backup of a third party or guarantor. It means that the third party guarantees the loan, i.e., if the borrower defaults on the loan, the third party will have to repay it. A guaranteed loan gives high-risk borrowers a chance to access the funds they need despite their credit score status. Not to mention, a guaranteed loan also assures the lender that they won’t lose their money.
A guarantee is either limited or unlimited. For a limited guarantee, the guarantor will only cater for a portion of the guaranteed loan if the borrower defaults. On the other hand, for the unlimited guarantee, the guarantor will cater for the total amount of the guaranteed loan. The third party or guarantors can be the borrowers’ close relatives, friends, and sometimes the government.
Types of Guaranteed Loans
There are several types of guaranteed loans. They include:
A Payday loan refers to short-term finance (average amount is around $500) that a borrower takes to sort out some financial issues before they receive their paycheck. Usually, the salary acts as the third party and guarantees the loan. Private lenders, companies, apps, or startups mainly offer payday loans.
The borrower is supposed to write the lender a post-dated check so they can cash it on the due date. Sometimes, the lender may need electronic access to your bank account to withdraw the funds on the post date.
Payday loans carry high-interest rates of up to 400% APR and are most likely to lead a borrower into a debt cycle. However, these loans are ideal for borrowers looking for loans for bad credit. Some payday-guaranteed loan alternatives include credit card cash advance loans, unsecured personal loans, or easy loans borrowed from family or friends.
A guaranteed mortgage is another example of a guaranteed loan. These mortgages are for home buyers who don’t qualify for conventional mortgages or lack enough down payment. The VA, USDA, or FHA provide guaranteed mortgages. A mortgage guarantee is necessary if the borrower defaults on the home loan.
Student loans are loans guaranteed by the federal government. These loans have no credit checks and have the best terms and interest rates. Students repay these student loans once they leave college.
Eligibility Criteria for Guaranteed Loans
Here are some of the eligibility requirements for a bad credit loan :
- 18 years of age
- An American citizen
- A social security number
- Ability to repay the loan
- Active bank account
- Minimum income of $800 per month
Application Guide for a Guaranteed Loan
To apply for a guaranteed loan, you’ll need to fill out an online application that will only take you a few minutes. Then the lending agency will go through your application and match you with a legitimate lender if you meet the eligibility criteria. Once the lender approves your loan application, they’ll deposit your funds within 24 hours or sooner.
Where Can You Get Loans with Guaranteed Approval?
Loans with guaranteed approval are available in most US states, including Alabama, Florida, and Nevada. Most online lenders are willing to work with borrowers with bad credit. However, you must conduct thorough research on different lending agencies to avoid falling into the hands of scammers. In addition, states such as New York offer other services like installment loans, unsecured loans, debt consolidation loans, and bad credit personal loans.
Can You Get a Guaranteed Loan Approval with a Bad Credit Score?
It’s challenging to get guaranteed loan approval with bad credit scores. After applying for a bad credit personal loan, most financial institutions match your loan requirements and personal details with lenders who can offer the loan. However, a loan still needs to be guaranteed. The lenders must ensure that you can afford the loan you need and that the repayment is on time.
Alternatively, you can opt for financial institutions that offer no credit check loans guaranteed approval. These lenders don’t pay much attention to your credit scores. Most companies are not lenders; they act as intermediaries between borrowers and lenders. Generally, finding no credit check loans guaranteed approval by a direct lender is difficult. Equally important, expect high APRs for instant loan approval, especially if you have bad credit scores.
Moreover, repaying a guaranteed loan on time is also a good way to increase your credit score.
How Does a Guaranteed Loan Work?
An individual looking to borrow money or make certain purchases, such as a home, may only sometimes meet the desired qualifications. They may have a bad or poor credit history, not be able to pay the down payment needed if they take out a mortgage, etc.
Therefore, such people need a third party to guarantee the loan so that they can receive the necessary funds or mortgage. Generally, a guaranteed loan allows borrowers who need financial assistance without the requirements to secure funds. A guaranteed loan also ensures that the financial institution or bank doesn’t incur extreme risks when giving the loans in minutes.
Guaranteed Loans vs. Secured and Unsecured Loans
While confusing these terms is easy, they are different.
Third-parties back guaranteed loans. Therefore, if a borrower fails to repay the loan, the third party will repay the loan.
Secured loans refer to loans that are backed with an asset that functions as collateral. The collateral used will be seized if the borrower fails to repay the loan.
Last but not least, an unsecured loan refers to a loan without any collateral. These loans include personal loans, credit cards, and student loans. For unsecured loans, the ability to repay the loan relies on your word.
How to Maximize Your Chances of a Guaranteed Loan Approval?
As a borrower, you’re looking for ways to increase your chances of receiving a loan. Here are some of the ways that you can maximize your chances of guaranteed approval loans:
Good Credit Score
As mentioned earlier, most financial institutions will not consider unsuitable credit scores. Therefore, one of the ways to increase your chances of loan approval is to maintain a good credit score. Not to mention, most institutions will also lend to borrowers with bad credit scores as long as the score is improving and not worsening.
Having a regular income (whether for months or years) shows that you can pay the loan since there’s money coming in. This way, lenders will approve your loan fast since the risks are low.
Ability to Pay the Loan on Time
If you pay your previous loans on time, your chances of loan approval increase. In addition, having less debt will also increase your chances of loan approval.
Provide Accurate Information
Most lenders will thoroughly check your finances to ensure you can repay the loan. Therefore, you must provide accurate information (your address, email, contact details, name, or bank address) to the lender, as this will increase your chances of loan approval.
Availability is another crucial factor in loan approval. Lenders may have questions regarding the loan application and may email or contact you in other ways. Therefore, you must ensure you can respond to their email or phone calls for fast loan approval.
Get Guaranteed Loans For Bad Credit
Guaranteed loans require backup from third parties responsible for repaying the loan if the borrower defaults. For most financial lenders, you qualify for easy approval loans despite a bad credit score as long as you meet their eligibility criteria.
However, no loan approval is guaranteed since the lender must conduct detailed checks to ensure you can afford the loan. To learn more, visit Money-Wise today!