What Is A Guaranteed Loan?
A guaranteed loan is a loan that requires a guarantee from a “third party” in case the borrower fails to pay it back. In some cases, the borrowing is guaranteed by government institutions, which in case of default, treat this loan as their liability and pay it off. They may also “purchase” this debt from the lending institution and pay it back on the same terms and conditions.
The most common form of guaranteed loans is a payday loan. In this case, the salary of the borrower acts as third-party to the agreement between the lending institution and the borrower.
A guaranteed loan is customarily seen as a way of getting immediate funds for someone who is in dire need. Also, the assumption that downplays the concept of guaranteed loans is the idea that the borrowing candidate is not viewed as a Valid or attractive subject by the lending institutions.
What Is A Payday Loan
A payday loan is the most common type of guaranteed loan. This is a short-term loan with small amounts of borrowing and a high-interest rate. These loans are also known a cash advance loans because the borrower is also the third party. How? The borrower’s next pay-day or salary check acts as a guarantee for the loan. The borrower typically writes a cheque for a later date (usually pay-day) which can be cashed by the lender on the date that has been mentioned on the cheque.
Although the law requires payday lenders to disclose their charges, most lenders carry on this practice with hidden charges. Most payday loan borrowers have low income, and they borrow for a short period. This allows the lenders to charge more than 900% of the interest rate for other loans. For example, the charge per $100 is $17.50, which may seem small but adds up if you calculate it on an annual basis. Most payday loans are equipped with a pay-back period of 30 days and range from $500-$1,500.
Although the interest rates may be higher, several pros keep this practice alive. In fact, most individuals will prefer a pay-day loan over any other kind.
1. You Can Access Them Online
This makes payday loans very convenient. You do not have to leave your house or spend hours waiting for customer service representatives. This loan gives you the ease of applying online even in the middle of the night. In case you need some funds the next morning for hospital bills or anything else you can easily fill out forms online to get funds transferred. After filling an online application, you are likely to get funds transferred to your account in a few hours. No Questions
Banks do not just give you money. They will ask you the; what when where and how of your life. Also, banks will thoroughly research your background credit, and if you have any discrepancy, there is a solid chance you will not get any loans. What guaranteed loans do is check your employment validity and make sure that your salary covers the borrowed amounts. In case of Banks, guaranteed loans are obtained on the guarantee of the third-party.
Well if you are getting a loan from the bank then there is likely to be paperwork. But, if you opt for a payday loan online, there will be absolutely no paperwork. Payday loan companies will do a background check on your employment documentation, pay slips and bank statements. This will be done under 30 minutes, and you will have your loan.
3. Quick Cash
For larger amounts, you may have to wait for some time. But if you need amounts like $100 up to $1500 you may need it immediately. Payday loans offer you the opportunity to receive cash immediately.
4. It’s Your Own Money
Guaranteed loans save you the embarrassment of approaching your family and friends for financial help. You can get a loan and pay it back from your salary cheque without anyone knowing.
5. Flexible Payment
There is an option for you to make the flexible payment rather than getting the complete amount deducted from your next paycheque. Moreover, with online access, you can also chat with a customer service representative to extend your installments without the hassle of leaving your home.
6. No References Needed
In case of Payday loans, you hardly need any references. Even if you are opting for other kinds of guaranteed loans from a bank, your designated “third-party” is all the reference you will need.
7. Several Options
When getting a loan, you always search for an institution that will get you the lowest rate of interest. In this case, you can easily surf multiple options and choose a website that adheres to your requirements. This is comparatively ideal because almost all banks now operate on the same terms and interest rates and this may not be convenient for you.
8. Consolidated Debt
Guaranteed loans can easily be added to other loans such as a car loan and paid back in a lump-sum with you fussing over separate payments. They can easily become a part of a consolidated loan that you get from a bank or any other financial institution.
9. No Credit Hassle
If you own a credit card, you are likely to credit money even when it is not a necessity. Payday or guaranteed loans help you keep your finances in check, and you will avail this only when you are in absolute need. Moreover, this is a perfect way of avoiding the credit-card charges.
Payday loans are the most convenient form of guaranteed loans. The best part is the online access and paper free transaction.