July 7, 2021
THE NUTS AND BOLTS OF GUARANTEED LOANS – A COMPARATIVE ANALYSIS
By : Ellie Brown
Financial constraints have become a part of life. You can think of financial balance all the time. At some point, you must be ready to face unwanted situations.
Now, it is true that messy circumstances will come but finding their solutions is equally important. Of course, you will search hard or ask questions to the expert. You can do that, but there is one more solution available (perhaps the easier one).
Here, we are talking about the loans. These can be your second source of income because of their easy availability. Both the traditional lenders and modern lending firms are offering loans on varied norms.
Easy availability does not mean easy loan approval. You may wrong that if you think that financial mess is there, you can apply for a loan and get the desired funding.
There has to be some process that you should follow. Besides, you should be sincere enough to get guaranteed loans in your favour.
The Concept behind Guaranteed Loans
According to the Financial Conduct Authority (FCA), no lender can guarantee the loan, and there have to be only affordable loan deals for everyone. Borrowers have to fulfil certain eligibility criteria to get approval on an assured basis.
The guaranteed loans are those funding sources, which have to be guaranteed by a third party. Now, you may put a query who can be that third party? Here are the answers:-
Guarantor: To get the loan, your application must have the guarantee of another person. The individual should have a good credit score and earning a full-time income. With having a guarantor to your side, you can apply for a larger amount to fulfil big financial goals.
Collateral: If you cannot arrange a guarantor, you can put a valuable asset against the loan amount. It works as the loan collateral and relieves a lender with the possession of that asset if the borrower defaults. Such a loan guarantee is also useful for long-term financial needs.
Income: Many people struggle when they do not have a guarantor and collateral to guarantee the loan repayment. Some online lenders in the UK have started giving another alternative so that one can still get the loan approval. This option is similar to payday loans, where borrowers’ income works as the loan guarantee.
Now, you have understood the concept of guaranteed loans. The time has come to do a comparative evaluation of the loans.
Advantages of Guaranteed Loans
Guaranteed loans have many advantages for the borrowers, which we are going to discuss here.
- Maximum Loan Approval Chances
In the above explanation, you have seen that three options are there to get the guaranteed approval. It means if you can arrange a guarantor to have the loan approval. If no guarantor, you can do this by putting collateral and if not collateral, you can get approval on your income.
The amount may vary according to your loan guarantee, but you will enjoy maximum loan approval chances.
- Loans Come Beyond Credit History
Since the loan approval criteria vary, lenders may agree to your loan application despite having a poor credit history. It is a huge relief for the people with the maximum population in the UK. They have already received rejections from mainstream lenders, but they still have a chance with online lenders.
At the same time, if you can get flexible repayment plans, you can improve your credit scores.
- The Loan amount for almost every need
Guaranteed loans bring a nice opportunity to your favour by providing the loan amount for almost every loan amount. With a guarantor, you can borrow up to £50000, while pledging the collateral can bring an amount up to £70000 or more.
However, if you have chosen the third option, i.e., your income, it is only for a small amount depending upon the income capacity.
Disadvantages of Guaranteed Loans
You cannot be too much confident about the guaranteed loans, as they also have some disadvantages.
- You may be trapped into mere advertisements
We have already informed you that FCA does not allow any lender for the guaranteed approval. Still, many lenders are advertising their products by highlighting the guaranteed word. As the borrower, you should be extra careful from this and search hard to find out the responsible lender.
- Higher interest rates
There is always the chance of higher interest rates. It is especially when you do not have the guarantor or collateral to secure the loan amount. Rates come higher if you have lesser financial credibility due to poor credit scores.
Lenders remain on the worry aside for the repayment of the lending amount. Therefore, they put higher rates on the loans to compensate if the borrower defaults.
- Loans can impact your credit score
Guaranteed loans can have an impact on your credit score. It can happen when you do not repay the loan amount under the given schedule. This becomes riskier when you and your guarantor both are not able to repay the amount. Therefore, making repayments on time is extremely crucial in these sorts of loans.
In the Nutshell
Availing guaranteed loans can be beneficial as well as risky to your finances. It depends largely upon your skills as the borrower and your research for a reliable loan deal. Having FortniteMoney as your lender is your need. It has a good lending record in the UK marketplace.