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WHAT IS A GUARANTEED LOAN?
Guaranteed loan is a loan that requires a third-party guarantor or assumes debt responsibility in case the borrower defaults payments. Guaranteed loans are sometimes guaranteed by government agencies which purchase the debt from the financial organisation that lends and take up the loan responsibility. There are two types of guarantee-limited and unlimited. With a limited guarantee, the guarantor only pays off a portion of the liability while an unlimited guarantor means the guarantor will pay-off the full amount of the liability. But most often, guarantors don’t accept the full loan responsibility. They can decide to pay off the principal or only the loan interest but not both. In the majority of cases if the loans are significant, there may be more than one guarantor that are each responsible for a specific part of the loan. In the case where a guarantor is unable to pay his/her loan portion, the other guarantors will independently pay off that portion.
How Does A Guaranteed Loan Work?
A loan agreement can be made when the lending firm or bank sees the applicant as an unattractive contender for the loan. guaranteed loan method is a means by which persons in need of financial assistance secure some money if not, they may not qualify to acquire them. The guarantee means the lending firm doesn’t incur excess risk when they issue these loans.
Who Is A Guarantee Loan For?
A lot of people can serve as a guarantee for a loan. The best applicants for such loans are those who want to build, rebuild or improve their credit history. Since there is a guarantor, the loan approval will be much easier even if the applicant is with a bad credit score. This is also a good option if you are caught up in an emergency situation and need cash urgently and fast. Its approval is much easier for any situation you may find yourself in provided you have a guarantor.
Types Of Guaranteed Loans
There are diverse types of guaranteed loans. Some involve the risk of high interest rates and others are reliable and safe ways of raising money. Borrowers ought to examine and scrutinize the terms of guaranteed loans they are taking into consideration.
1. Guaranteed Mortgages
Guaranteed mortgage is an example of a guaranteed loan. In most instances, the Department of Veterans Affairs (VA) or the Federal Housing Administration (FHA) is the third-party guarantor for these loans. The requirement of an FHA loan is that the borrower pays an insurance on the mortgage just in case the borrower defaults on the loan. Risky borrowers may get guaranteed mortgage loans if they are not eligible for a conventional mortgage or don’t have a satisfactory down payment and have to borrow about 100% of the value of the home.
2. Federal Student Loans
A federal student loan is another type of guaranteed loan. It is guaranteed by the federal government loan agency and are easy to qualify for. It requires no credit check and have the lowest interest rates and best loan terms since the U.S. Department of Education guarantees the loans. To qualify for the federal student aid, you must complete and submit the Free Application for Federal Student Aid (FAFSA) every year that you want to continue to be eligible for the loan. When you drop below half-time enrolment or completes and leaves college, you will start to pay back the loan.
3. Payday Loans
A payday loan is also a guaranteed loan. The borrower’s paycheck plays the role of the third-party guarantee for the loan. The lending firm gives the borrower the loan. The borrower then writes a post-dated check and hands it over to the lender to be cashed on the due date, usually after two weeks. The lenders sometimes require an electronic access to the borrower’s account to withdraw the funds, however it is advised that you don’t sign a guaranteed loan under such circumstance, particularly if the bank is not a traditional bank. Payday loans tend to create a debt cycle which negatively affect borrower’s financial status and can cause problems for individuals already in financial difficulties. This is more evident when the borrower does not have the money to pay back the loan at the agreed time. In this situation, the loan rolls over into another with a whole new fee. Lenders usually charge the highest interest which the local laws allow, and this interest can be 400% and more. Some corrupt lenders can attempt cashing out the borrower’s check before the due date and this creates an overdraft risk.
Types Of Guarantees?
Below are the four common types of guarantees:
1. Security guarantee
Mostly, people with outstanding credit history but no deposit and want to buy a home use this guarantee. The guarantor, who can also be called an equity guarantor use his/her asset such as real estate as an additional security for the borrower’s mortgage. The bank or lending firm can take another mortgage as a form of security if the guarantor already has a loan on his/her property.
2. Security and income guarantee
Parents are mostly the people who serve as the guarantee. The lender uses the parent’s property/asset as a security and depend on the income of the parents to show the loan will be repaid.
3. Family guarantee
The guarantor in this case is a relation of the borrower. On a case-by-case basis, parents, spouses, siblings and grandparents are considered.
4. Limited guarantee
The guarantor in limited guarantee guarantees only a portion of the loan. The guarantee is mostly used with a security guarantor to lessen the probable liability that is secured on the property of the guarantor. depending on the lender’s requirements and what the guarantor’s wants, the guarantee might be limited or unlimited. Using a limited guarantee implies a reduction in exposure of the guarantor to your mortgage.
Guaranteed Loan Application
Since guaranteed loans are specially made for people who are unable to get a loan, the application is simple and only needs a person to guarantee the loan. It is not necessary for the borrower to have a full-time job or a credit history since the person guaranteeing the loan does the repayments. The only requirement is to have a checking bank account and be 18 years and above to be eligible for such loans. The borrower is only expected to make repayments on a regular basis as agreed and documented.
Can I Get A Guaranteed Loan?
Most people who opt for guaranteed loans are unemployed, have bad credit score or need the cash urgently and don’t want to apply for multiple loans in a short time. You may be worried about the possible rejection due to the above reasons, but reputable lenders don’t focus much on these factors to grant you the loan, but they will check them. They will also access the probability of you paying back the loan. Regardless of this, there are some lenders with high acceptance rates and consider a wide range of criteria before issuing the loan.
What Is The Purpose Of Guaranteed Loans?
Most guaranteed loans are short term and can be easily obtained. They are only for emergency purposes and shouldn’t be taken to settle a long-term debt. They are only designed to cushion you till your next payday. You can use the loans for car repairs, hospital emergency, etc. Most lenders do not ask the borrowers why they need the loan or its use but advise you use it only for emergencies.
How Does Guaranteed Loans Work?
Assuming you need $100,000 to start up a business and you want to borrow that amount from a lending firm, you will be responsible for repayments on the loan, but you have to provide another person with a good financial standing to guarantee the loan. When that person guarantees the loan, it means he/she has agreed to pay back your loan with his/her personal cash or asset in case you’re unable to pay back the debt. Sometimes more than one person can guarantee a loan. In this scenario, each guarantor is responsible to pay back a portion of the loan according to the calculated share of the debt but in some cases, each of the guarantors can take responsibility of the portions of the other guarantors if they default on their payments. The federal government usually guarantees student loans for young students and those with no real credit history.
How To Apply For A Guaranteed Loan
When applying for a guaranteed loan, consider the interest fees, total repayment cost and the Annual Percentage Rate (APR). When you apply through the internet, it makes the process clear, quick and straightforward. You can also take your time to read through the terms and conditions of the loan before you apply for it to avoid any delays.
How Likely Am I To Be Guaranteed A Loan?
Currently, short-term lenders accept bad credit ratings based on certain considerations. This includes employment status, household income and monthly wage. This to the lenders determines the likelihood of the borrower repaying the loan. Some lenders are very strict and other charge very high interest rates just to assure themselves of their security. Most lenders will only lend huge sums of money to borrowers they perceive as good candidates because of the risk involved. That does not mean people with bad credits cannot apply and get a loan, they can but they might not get the exact amount they need. They may get a lower amount since borrowers perceive such people as not responsible and may lose their money in the end-High Risk. The likelihood that traditional loans and long-term lenders will not give out loans with bad credit is higher than that of payday and short-term loans. The banks for example will run a credit check and based on your credit score, might either accept or refuse you. If you have a poor credit score, the banks may refuse you completely without getting additional information such as level of income or employment status. If lenders refuse to grant you a loan, don’t settle for a company that does not run credit checks since most unregistered lenders depend on you not being able to pay back and for that reason charge outrageous APR and interest.
What Is The Cost Of A Guaranteed Loan?
With guaranteed loans, you will have to refund the principal and the interest on the loan plus any additional cost involved in the loan agreement. The earlier you make payments on the loan, the less interest you are likely to pay. Some lending firms charge an APR every month. This implies that you might pay a fraction of the total amount you borrowed every month till you completely pay off the loan. Based on a portion of the full amount you borrowed, some lenders may charge a fixed fee and request that you pay-off the full amount in few weeks or months. Before you agree to any loan, be certain you will be able to pay the full amount in the due time.
Who Can Be A Guarantor?
It is necessary to have a guarantor who will be approved if you need a guarantee loan. The guarantor should be above 18years of age and should have established a credit. The guarantor must also have a good or excellent credit score and credit history that can minimize the risk involved. The guarantor must have savings or a minimum income and a checking back account. When the borrower is unable to make the necessary repayments on the loan, the guarantor takes responsibility of making those payments. Repeated late repayments of the loan can also affect the guarantor in a negative way. The loan guarantor is best utilized when the borrower is finding difficulty in getting a loan during and emergency financial crises. Depending on your situation, you can borrow about 7,500, or possibly more with up to 5 years repayment term for easy management and flexibility.
Guaranteed Loans For All Credit Histories
Loan firms give everyone equal opportunities to borrow money during emergency situations. Loan Institutions work hard to offer credits in a discreet and transparent manner. Their loans are offered with flexible repayment plans to help the borrowers rebuild their credit score. These loans are specially made for people with bad credit or are unemployed but need quick cash for an emergency. These loans are also available to people with no credit score and are applying for the first time to improve their financial well-being.
Why Guarantees Are Important
Guarantees alleviate risk, but you should be aware that they don’t make a loan free of any risk. If the liability is too large for the guarantor or he/she is going through a though financial crises, the guarantor can default on his/her agreement the loan. Irrespective of this, guarantees give an extra security, giving guaranteed loans a higher credit rating. Guaranteed loan lenders must also provide the guarantors with the terms and conditions, history and events to put them on track and alert. The lender must also disclose the maximum potential of a liability on the guarantee and any available provisions that can permit the guarantor to recuperate the cash he/she paid under the guarantee.
Do You Have A Bad Credit Score?
The fact that you have a bad credit score does not mean you can’t apply for the loan. There are numerous lenders out there who will be glad to offer people with bad credit scores loans. But that means borrowers with bad credits must expect to have higher loan interest rates than if they had a good credit score. Lenders charge these higher interest rates on loans with bad credit because of the risk involved in lending the money. It is therefore important to repay your loans on the monthly basis to improve your credit score and also get better rates on subsequent loans. You can get personal loans for bad credit online. Legal lenders do not offer guaranteed loans for people with bad credit as the approval of the loan is based on credit checks and affordability assessment.
How do I Make Repayments?
There are several methods by which lenders accept repayments. Usually, most lenders accept debit card direct debit or standing order payments. Note that it is not right to pay a loan with a credit card since it is the same as borrowing money and you can incur more debt by using it. If your credit is poor and you are in financial difficulty, getting a guaranteed loan will look like a lifesaver to you but note that these loans are not as friendly as you see them. Though people place a high value on guaranteed loans as a way of getting money fast and with no credit check and easy loan application process, it doesn’t exactly work that way. Most lenders make sure you have a stable source of income before they lend the money to you.
Finding Guaranteed Loans and Guaranteed Payday Loans for Bad Credit
Off late, getting a guaranteed and payday loan when you have a bad credit is no longer a problem, especially for borrowers with urgent financial need. There are several innovative new loan services that are readily available to all borrowers in spite of their bad credit history, making guaranteed payday and guaranteed loans easier. In recent times, there has been a rise in loan services as the demand for loans is continually increasing, not to mention the inevitable upsurge in the number of borrowers who have not paid their debts. Loan institutions and traditional lending firms have adopted a credit scoring system to address such difficulties both short and long term. This credit scoring system easily classifies borrowers in accordance with the required standards by the lending firms. The scoring system groups borrowers as not likely in the position of repaying their loans in future easily and separates them from those who are likely to repay their debt with less problem. Borrowers who fail to make the agreed monthly repayments under this scoring system will automatically have a bad payment history reflected in their records. Those with low levels of income who are hoping to get loans but don’t meet the minimum requirements the lending firms have set are automatically given a poor credit score. This results in the disqualification of borrowers with bad credits and bad repayment history who apply for a loan from any of the standard lending firms and organizations. Due to this, borrowers with urgent financial problems have few and impractical options. Although a lot of borrowers tend to take loans from their family and friends or settle on selling off their properties or belongings to raise some cash to cover their financial situation, others may opt to secure a loan from underground lending firms. Though underground lending gives borrowers the short-term financial relief they desperately need, the consequences in the long-term usually leave the borrowers in tougher financial circumstances. Due to the high rates of interest the underground loan services offer, most borrowers get trapped in a cycle of tough financial situations and debt.
To be eligible for a guaranteed loan, the borrower must:
• Be 18 years and above
• Be a resident U.S.A
• Have a steady income
• Provide a valid banking information
• Provide a proof of employment for more than three (3) months
A borrower’s loan request will not be approved if he/she fails to meet the above criteria. Also, customers usually offer 1-5 year terms of repayment.
How Can I Benefit From Guarantor Loans?
There are several benefits associated with guaranteed loans, but this depends on your financial goals and circumstances. With guaranteed loans, a you can:
• Buy a property since you don’t need a deposit
• Zoom faster into the property market
• Avoid the lender’s mortgage insurance cost
• Get better loans with good rates
• Consolidate some debts when you purchase a property
• Limit the guarantee size
Differences Between Personal Loans And Guaranteed Loans
With personal loans, you can apply for the loan on your own. It is beneficial to people with a reasonable credit score. Guarantee loans may be ideal for you if you are having difficulties in getting a loan due to your poor credit. When you apply for a guarantee loan, you will have to provide a guarantor and he/she can be a member of the family and willing to guarantee the loan. Being a guarantor can impact your credit score but if you are in good financial standing to guarantee the loan, your credit score will not be affected. As soon as the guarantor agrees to the terms of the loan, the process begins. The form will request the applicant’s basic information and that of the guarantor. Once the applicant is done filling the form, the checks will be made, and the borrower will receive a confirmation if the loan is approved. The borrower will receive the funds through his/her account for use: -simple and straightforward.
When Should You Consider a Guaranteed Loan?
It Is important to make financially sound decisions if you want to help someone build or rebuild their credit history. It is okay to borrow small amounts as it’s a lifetime risk of your financial responsibility for someone who possibly needs another chance or hasn’t shown they are capable of managing their finances. The loan is worth the consideration if the guarantor and borrower are able to make on-time payments. Helping a close friend, relative or loved one build a credit is worth it, but it is necessary the guarantor protects his/her credit. It is better to lend money from savings to a distant friend rather than risking the huge payments on the interest you will be responsible for.
Disclaimer: All loans offered through this website are subject to credit and underwriting approval. AfterLoans.ca is a lead referral company, not a lender. AfterLoans only works with financial service providers that adhere to Canadian laws and regulations. Our lenders lend from $500-$5,000. Loans amortization is between 6-36 months. APRs range from 19.99% to 55%. The actual APR charged will depend on the lender’s assessment of your credit profile. For example, on a $1000 loan borrowed for 12 months at 29.9%, the monthly payment will be $97.24; with a total repayment, including interest, of $1166.88 There is also lender’s optional loan protection policy. In the event of a missed payment an insufficient funds fee of around 45$ may be charged (dependent on the lender). If you default on your loan payment plan the lender may terminate the plan and the remaining balance will become payable immediately. Our lenders employ fair debt collection practices, but will pursue the payment of Outstanding debts to the full extent that Canadian law allows.