We talk quite a bit about getting loans online here, but when I decided to write about guaranteed personal loans (which a number of people are interested in), I was stumped. I didn’t know what one was. And unfortunately, searching the web only lead to more questions. After a few hours of research, the source of confusion became clear to me: there are 2 distinct types of “Guaranteed Personal Loans”, but they are often confused (which makes sense, since they go by the same name).

Traditional Guaranteed Loans

First is a traditional guaranteed loan - in this loan, the guarantee comes from the government (or occasionally, another third party), and it goes to the lender. The only benefit to the borrower is that lenders are more likely to give them a loan regardless of their credit - the risk for the borrower is significantly reduced, because they know that if the borrower defaults, the third party will pick up the tab. This type of loan generally happens with mortgages.

Loans With Guaranteed Approval

The second type of loan, and the kind that is much more popular and well known, is the guaranteed (approval) personal loan. In this type of loan, the lender will guarantee that a borrower will be approved for a loan, regardless of credit score or history. This makes guaranteed personal loans a great choice for people with bad credit, or no credit. Because the lender is promising to give you a loan no matter what, they often impose caps on this type of loan - the loan might be available up to $1500 or $2000 dollars, but if you require more than that, you’ll need to pass a credit check and o through a more traditional approval process, even with lenders who are particularly lenient.

Guaranteed Personal Loans, however, come at a price. By taking on a lender who is obviously seeking out an option that doesn’t require a credit check, they are almost always higher risk. The lender has to mitigate this risk somehow, and generally does it through higher interest rates. Guaranteed Personal Loans are great because they allow anyone to get cash quickly, but borrowers need to read the fine print, and pay attention to the terms of the loan.