What are guaranteed loans? Are they authentic?

You all know that getting approval for a loan with a bad credit rating is not a cinch, but when you need money urgently, you often wonder whether there is a possibility of a guaranteed loan. What is a guaranteed loan? This is the first question that crosses most people’s mind. A guaranteed loan is not any type of loan. In fact, it is a deceptive term. Many people think that guaranteed loans are those loans that cannot be rejected regardless of your credit rating and income sources.

As a matter of fact, no lender would ever be able to approve your application without reviewing your credit score and income sources. While your financial condition throws light on your capability to adhere to payments, your credit history is an acknowledgement of your credibility in the past. Some people think that lenders should not bother about credit ratings as borrowers’ ability to discharge their obligations heavily hinges on their income sources, but lenders state that it is likely that borrowers abdicate their responsibility despite having a great income source. Therefore, it is worth looking over their credit reports.

What are guaranteed loans?

Guaranteed loans do not exist at all. Some lenders use the term “guaranteed approval” in order to suggest higher acceptance rates than traditional lenders. Of course, when the approval rate is high, you will be willing to submit a loan application. By guaranteed approval, most of the lenders imply that the acceptance rate is high. It means even if your credit score is not up to scratch, it will not preclude you from submitting your loan application, but it does not insinuate that you will certainly be approved.

Bear in mind that lenders will take into account other factors in order to decide whether they should sign off on or not. It is likely that you cannot repay your debt because your income sources are low.

Your credit score plays a very important role in approval. You can certainly qualify for a loan with a bad credit rating as long as the borrowing amount is exiguous and you prove your repayment capacity. If your credit score is very poor, lenders will most likely turn you down.

If you are applying for fair credit score loans, do not assume that this entirely removes the chances of rejection. A fair credit rating can increase your chances of being accepted, but it does not guarantee that you will get approval.

In addition to your credit rating, the following are the factors that lenders consider in order to decide approval:

A debt-to-income ratio

A debt-to-income ratio suggests how much debt you owe against your income. The debt-to-income ratio does not influence your credit rating. However, lenders consider this ratio when it comes to approving your loan application. A debt-to-income ratio should be up to 30%. If you keep it lower than that, it is much better. Try not to have a higher ratio because it will call your credibility into question.

The size of the loan

Your chances of getting approved for a loan are quite high when you borrow a small amount of money. Lenders do not feel inclined to approve your application when your credit rating is poor and you borrow a large amount of money. Most lenders will not let you borrow more than £700.

If you borrow more than that, make sure your credit rating is at least fair and your income sources are strong.

Ways to increase your chances of getting a loan approved

Here is how you can increase your chances of being approved for a loan:

You will need to improve your credit score

No matter how high the chances are that you have to get approval, it is recommended that you improve your credit score. A decent credit rating is a must in order to ensure that your lenders accept your application. When you have a good credit rating, you will be able to borrow a larger amount of money. In order to improve your credit rating, you should consider the following steps:

You should pay off your bills on time. If you have any outstanding debt, make sure that you come up with a strategy to clear it.

Try to pay more than the minimum balance in order to avoid accrued interest.

You should settle your credit card bills on time. If you have multiple credit card bills, consider applying for a 0% credit card deal.

If you are juggling multiple debts, you should consider consolidating your debts.

Keep your debt-to-income ratio low. It should not go beyond 30%.

Your credit utilisation ratio should also be lower, not more than 25%.

It will take some time to improve your credit score, so be patient and adhere to your plan. In addition, you should check your credit score from time to time. Your credit file might have some unidentified accounts and errors. Dispute them if you find any.

Consider applying with a guarantor

You should try to apply for a loan with a guarantor. The guarantor must have a good credit history. A guarantor will reduce the risk on the part of a lender because they can hold you to discharge your debt if all means of covering the money back from you have been exhausted.

Bear in mind that the guarantor you arrange will also lose their credit points if you fail to settle your debt. This is why most of the people refuse to act as a guarantor. You should try to apply with a co-applicant if you cannot arrange a guarantor. A co-applicant is a co-borrower.

It means you both are completely responsible for the settlement of the whole or partial debt. Both applicants will see an impact on their credit rating.

To wrap up

Guaranteed loans do not exist at all. No lender can guarantee a loan approval without a perusal of your credit score and income sources. By guaranteed loans, lenders mean that approval rates are higher than traditional loans.