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Loan guarantee

It is a loan guaranteed by a third party in case the borrower defaults on loan repay.


As the name suggests, in this article the Topic For Discussion is loan guarantee.

What is a ‘Guaranteed Loan’

It is a loan guaranteed by a third party in case the borrower defaults on loan repay. It happens sometimes, that a guaranteed loan is guaranteed by a government agency, that  purchases the debt from the lending financial institution and takes on responsibility for the loan. Another example of a guaranteed loan is a payday loan. When someone takes out a payday loan, their paycheck acts as the third party that guarantees the loan.

BREAKING DOWN ‘Guaranteed Loan’

A guaranteed loan agreement is made in case the borrower is an unattractive candidate for a regular bank loan. It is a way for people in dire need of financial help to acquire funds, without the lending financial institution exposing itself to an unwanted risk.

Below we are telling you how a payday-style guaranteed loans works. The lending organization gives you the loan, and you write them a post-dated check and they cash it on that date – two weeks later in normal conditions. It is best that you do not sign onto guaranteed loans with lenders that ask for electronic access to your account in order to pull out funds, especially if the lender isn’t a traditional bank.

Alternatives to Payday Guaranteed Loans

Below we are sharing some of the popular, often far cheaper, alternatives to payday guaranteed loans:

  • Unsecured personal loan – It may take a few days more to get that much needed cash, but these types of loans are far more cheaper and have longer loan repayment terms. These Personal loans are available both through local banks and online.
  • Credit card cash advance – If it is a one time need, then you can save a considerable amount of money over payday loans even with rates that can go upto 30 percent at times.
  • Borrow from a family member – Mixing both family and money can be difficult, but it beats while you are taking out a payday loan. Just be sure that you have set clear terms with your family member.