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The number of financial companies offering guaranteed unsecured personal loans on the internet has grown exponentially over the past few years. As with all internet companies offering deals that are too good to be true, the personal loan sector in the finance industry is no different. There are good loans and there are bad loans. Many of the internet companies play fast and loose, meaning they want you to fill out the application right away before telling you the terms and conditions of the loan.
There are things you probably don’t know about guaranteed unsecured personal loans, especially when the loan will be used for personal purposes. Although it sounds great, such a loan needs to have its terms and conditions carefully scrutinized. We’ve compiled a rundown on what it means to get a personal loan that is guaranteed.
While bad credit is not an immediate no for a guaranteed unsecured personal loan, many times there are very heavy restrictions on the conditions of the loan. People tend to believe the hype without first reading the terms. There is always some kind of restriction, especially with guaranteed unsecured personal loans, which are the riskiest loan for the lender.
Personal loans are often made to people who have the highest credit score, and the best history of meeting all their financial obligations regularly over time. That does not really represent a healthy cross-section of the average person in our country. Because of that disparity lenders have had to adjust over time, to the idea that many people don’t have perfect credit histories.
The short answer is no. There are alternative loans on the market, which don’t hold to the strictest guidelines for credit history and score – but there will be other conditions that need to be met in order to secure that type of funding.
Some loans will require a co-signer, such as a person with a better financial standing, who will take some or all of the responsibility to pay back the loan if the borrower defaults on the agreed terms. You may qualify for a lower total loan amount, such as $1,000 instead of $5,000. That could mean you could pay for something unexpected such as a car repair and have a little leftover to pay a small debt. There are many lenders who will work with borrowers even if they have less than stellar credit.
Your FICO score is the place most lenders start when deciding to fund a loan request. Here is how those scores rate with most lenders
700 – 850 – This level credit score gets funded. A 700 means the borrower has a stellar history of meeting financial obligations.
680 – 699 – This is the Very Good range on the FICO scale; very few problems will arise when seeking a loan.
620 – 679 – This is a good score for the most part. The lending managers look at the circumstances surrounding these scores more closely. 620 is usually a cutoff for most large sum lenders like Mortgages.
580 – 619 – While still a viable score, this is not considered a good score but more of a needs work score. Here is where the institutions will pass on funding, and the online lending sites and some credit unions will look more favorably on the borrower.
500 – 580 – At this point, the lender is going to be offering high-interest rates, higher payments and shorter length of the loan term.
499 – Less -While it may not be a complete washout, there are very few lenders who are willing to fund such a low credit score. There are financiers who will fund this very poor score, but borrowers should exercise caution when dealing with a willing lender at this level.
Usually, there are signs that something is wrong with a lender. The terms guaranteed, no credit check or everyone is approved, should all be red flags to borrowers. Some of the warning signs of an illegitimate lender, or a predatory lender, are listed below.
Extreme Interest Rates
Many short term loans that are attractive to the person with bad credit, mean high-interest rates, with APR’s that could reach 400%, because of the high fees that are levied on the principal. For a payday loan, you borrow $400.00, the fee is levied at $20 per $100,00 secured. That is $480.00 in total and extreme APR of around 450%.
The Fee Maniac
Usually the predatory loan company will require a number of extra fees, for things like origination, low (no) credit, fees for services such as paperwork and application, and taxes, such as federal or state taxes on the servicing of the loan, so that the total repayment amount is hundreds higher than the original loan.
Rapid Application Decisions
The loan company is offering no credit check, fast approval on low-dollar loans, in the $300 – $1000 range, as long as the borrower can offer a pay stub with a payment date of that week, or the previous week. Proof of employment stands in for credit and the fees are very high, and the interest piles up and usually make it very hard or impossible to pay off the loan. This is usually called a guaranteed loan and is discussed further in the next section.
Guaranteed is an often misunderstood term in finance. It has been used for everything from the guaranteed repayment option in student loans to immediate acceptance loans in the personal loan sector.
In a guaranteed unsecured personal loan, such as thing as a guaranteed, or everyone is approved, loan type is something to be thoroughly understood, before signing the promissory note.
In guaranteed unsecured personal loans, there are some, but for the most part, those are going to be difficult to get approved. Usually, the loan is either guaranteed or unsecured, not both. The guaranteed unsecured personal loan is tricky and something that should be carefully researched as some of the loan types is very difficult to repay. If you can, try to research lenders on a site like MoneyTime.com where the terms and conditions are spelled out, and the lenders are legitimate financial institutions offering reasonable repayment options. Below are the three most common guaranteed loan types.
Vehicle Title Loan
This type of guaranteed unsecured personal loan is based on the value of your car or truck and is secured through a clear title where the car or truck is owned completely by the individual seeking the loan. There can be no outstanding liens or restrictions on the title. The lender appraises the vehicle’s value and offers a loan based on a percentage of the assessed value. Many times the percentage is half of the total value of the vehicle.
The lender then works out a repayment schedule based on the borrower’s ability to pay, usually several payments per month, with a very high-interest rate, around 25%, calculated each month according to the Federal Trade Commission. The resulting Annual Percentage Rate can be greater than 300%. Usually, for the guaranteed unsecured personal loan there is a fee levied for the total amount of the loan, something like $20 per $100 borrowed.
The numbers for repayment can grow even more with taxes and hidden fees. Usually, the repayment amount is so high that the borrower misses a payment, and the vehicle is forfeited, based on the loan terms. Once the car is lost, the borrower has no way to get around and usually loses their job, making repaying the loan impossible. It is then that another loan is needed to repay the original loan and get back the car and the cycle continues.
PayStub or Payday Guaranteed Personal Loans
At the very bottom of the financial institution pool, payday lenders should be a last resort for anyone with bad credit seeking a fast loan. If you can prove you have a job, usually you can get a loan. Many times these loans will be advertised as guaranteed or no credit check loans of up to $2500 dollars. The repayment period is a fast 14 days, with interest running from 15% to 37%, and APR’s of 300% to 900%.
The cost of repayment is usually too high for the borrower to repay within the short installment period, so the borrower rolls over the loan into a new loan, or extend the repayment period and pays another, added a round of interest and fees. The result is creating a never-ending cycle of increasing payments that the borrower can not pay off.
Installment Personal Loans
While this is placed last, it is really a top tier option for many people with credit issues. These loans often take all credit levels and don’t require much in the way of collateral. If you have a decent history of paying things like rent or auto payments, you can get a loan. Again, researching loan types is the key to staying out of trouble. There are a number of reputable lending companies that offer terms that can be met by those who have bad credit and need a loan for something like a car repair.
To stay safe when seeking a guaranteed unsecured personal loan, the best thing you can do is read all of the fine print. The Federal Trade Commission requires that lenders provide adequate terms and conditions information before the loan is bound for disbursement. That is when the loan is approved and the borrower has signed the contract. Once the contract is signed the borrower is bound by the conditions of the contract.
Check All Options
Many times there is a better way to get the money you need fast such as a credit card or line of credit from a credit union. The terms are bound by stricter laws and such institutions have easier repayment options. Many times bad credit is okay for the loan requirements are based on a variety of circumstances, instead of just credit score or history.
The best way to find a lender is to do your homework – not all loans are reputable, or even worth the time to fill out the application. Remember all reputable lenders have minimum requirements. There will always be some small or easy-to-meet standard, even for the guaranteed unsecured personal loans.
The best advice anyone can give is to improve credit, buy paying obligations on time, keeping your accounts up to date, and not taking loans when another way to pay is available. Working to build good credit takes time and effort, but it is worth it when the reputable lenders approve your loan application.
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