Do Guaranteed Personal Loans Exists? A Phenomenal Discussion
Are you out of credit and looking for a guaranteed personal loan?
Check out the following article to get an insight into some important features and limitations of guaranteed personal loans. Here you will also get to know the reality of whether the guaranteed personal loans even exist or not. So stick to it and know all the secrets we're going to reveal.
Guaranteed loans are referred to as "no-credit-check" loans. It is a type of loan in which if the borrower fails to pay back, a third party tends to pay the lenders. It's like some short-term instalments or payday loans, but have the minimum requirements to ensure that the lender will not lose money. Although approval for guaranteed personal loans is easier, the interest rates and fees are quite high, and the lenders may not be trustworthy.
Here we will discuss what are guaranteed personal loans, how to shop for them, and a few alternatives to guaranteed personal loans. So, lets get started with the guaranteed personal loans.
Guaranteed personal loans - Introduction:
A guaranteed personal loan is a loan in which a third party accepts the obligation to pay the debt if the borrower fails to do so. In some cases, a few government agencies purchase the debt from the financial land-lease institutions and guarantee a personal loan, thereby taking on the loan's responsibility.
Examples of guaranteed loans include federal student loans- backed up by the United States Department of Education; guaranteed mortgages- backed by the Department of Veteran Affairs or the Federal Housing Administration; and payday loans- backed by the paycheck of the borrower.
Borrowers with minimal financial resources or poor credit usually avail guaranteed personal loans. Such financially unattractive candidates qualify for a loan through guaranteed personal loans by ensuring they will not lose money.
How does guaranteed personal loan work?
Now when you know what a guaranteed personal loan is, you must know how you can get to avail of this loan.
The agreement for a guaranteed personal loan is made when the debtor does not comply with regular bank loan conditions. Guaranteed loans are the way for financially unattractive borrowers to get financial assistance to acquire funds that may not be possible otherwise. The guarantee means the lending company or the institutions do not bring extreme risk while they issue these loans.
A guaranteed personal loan is also referred to as "predatory" as it provides excessive benefits to the lender at the borrower's expense due to high fees and interest rates.
With payday loan, the borrowers use a postdated authorization or check to debit cash reserve from your bank account, prepaid card account, or credit union as collateral. The loan amounts are quite small, i.e., $100 to $1000, however, lenders charge high fees to reach up to triple-digit APRs.
With quite short loan terms and high APRs up to 400%, make it very difficult to pay back the entire amount. This usually results in rolling over the unpaid balances into new loans. A payday loan can create a cycle of debt for you while you are already struggling with tight finances.
So, be careful while you avail some loan services as you might have to struggle at the double or even triple pace to pay it back.
A guide to shopping loans:
Here we present some important tips and points to keep in mind while you shop for loans. Watch these things while you opt for a certain loan.
- Hidden or too high fees:
Read all the terms and conditions and other information very carefully so that you can spot what sort of fees you have to pay and whether you can manage it or not. Apart from interest, some legal fees include prepayment penalties and origination fees ranging from 1% to 8% of the loan amount.
- High interest-rates:
Check if the loan comes with realistic terms for you to pay it back. Calculate your income along with the monthly repayment schedule and check if you can easily pay it back on time.
- Credit check:
Authentic lenders base the decision of credit on your capability to payback. They will verify your income, pull your credit history, and ask about debt obligations for monthly payments.
- Suspicious lenders:
Go through the Consumer Complaint Database of the Consumer Financial Protection Bureau. Avoid lenders who pressurize you to sign a loan agreement and borrow more than you can repay. Such lenders would not answer your questions and market to you constantly and aggressively.
Don't want to avail guaranteed personal loans? Check for these alternatives:
Guaranteed personal loans usually have more disadvantages than benefits; like high-interest rates, high fees, and a small loan amount. But is there any way out? For such loans that have more minuses than pluses, opt for one of the alternatives we describe below:
- Payday alternative loans:
Payday alternative loans are typically smaller loans, i.e., about $2000, and can be returned within 1 to 12 months. These loans are by federal credit unions whose cap applications won't charge excessive interest rates, and you do not end up rolling the loan over into a new one. Another thing to keep in mind while you get a payday alternative loan is to check whether the lender reports your timely payments to the credit bureaus so that you can qualify for better loans by improving your credit score.
- Consult a credit counsellor:
Seek low-cost credit counselling regarding budgeting, loan terms, and finding economical loans. Non-profit institutions often offer this service.
- Credit card:
Credit cards are more affordable than payday loans due to lower interest rates; however, for a financial emergency, check the interest rate and cash advance fee before you use a credit card. Moreover, ensure timely monthly repayments in full.
A guaranteed personal loan is a type of loan in which a third party agrees to pay the lender if you fail to pay back. These loans have a minimal amount about $2000 but quite high-interest rates, short terms, and hidden fees, these loans can steer you to a cycle of debt. It is better to build your credit and avoid these loans by trying out alternatives; if needed seriously, research the tips and tricks of buying guaranteed personal loans carefully.
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