What Are Guaranteed Loans and How Do They Work in Australia?
If you’ve been searching for loans in Australia, chances are you’ve come across the term “guaranteed loans.” But what exactly are they, and how do they work? In this article, we’ll explore the basics of guaranteed loans in Australia.
Updated by Steve Stemp on 16/4/23
What are guaranteed loans?
Guaranteed loans are loans that are advertised as being guaranteed to anyone who applies. In other words, if you meet the lender’s basic requirements, you are guaranteed to be approved for the loan. These loans are often marketed to people with bad credit or those who have been rejected for loans in the past.
However, it’s important to note that there is no such thing as a truly guaranteed loan. All lenders have some basic requirements that must be met before they will approve a loan application, such as age, income, and employment status. Additionally, lenders will conduct a credit check to assess the risk of lending money to a borrower.
While some lenders may be more lenient than others, and may be willing to work with borrowers who have less-than-perfect credit, no lender will approve every loan application they receive. Any lender that advertises guaranteed loans no matter what, without meeting any lending criteria, is likely engaging in false advertising.
How do guaranteed loans work?
When a lender advertises a guaranteed loan, they typically refer to a loan that is more accessible to people with bad credit. These loans may have lower credit score requirements or more lenient income and employment requirements.
However, even with a guaranteed loan, the lender may still conduct a credit check. While they may be more lenient with their requirements, they will still need to assess the risk of lending money to a borrower.
If you are approved for a guaranteed loan, the lender could charge a higher interest rate or fees than they would for a borrower with good credit. This is because the lender is taking on more risk by lending money to someone with bad credit.
It’s important to note that just because a loan is marketed as guaranteed, it doesn’t mean that it’s the best option for you. Be sure to compare rates and terms from multiple lenders before making a decision.
Guarantor loans are not the same as guaranteed loans. A loan using a guarantor is a type of loan where a third party agrees to take responsibility for the borrower’s debt if they are unable to repay it. The guarantor acts as a form of security for the lender, giving them more confidence to lend money to people with poor credit or who may not meet other eligibility criteria.
Guarantors may be required if you have no credit history but have a stable income, in order to be accepted by lenders. It’s important to note that even though a loan with a guarantor may increase the chances of being approved, it’s not a guaranteed loan as the borrower still needs to meet the lender’s requirements and repay the loan themselves.
While the idea of guaranteed loans may sound appealing, it’s important to remember that there is no such thing as a truly guaranteed loan. All lenders have some basic requirements that must be met before they will approve a loan application, and they will always conduct a credit check to assess the risk of lending money to a borrower.
If you have bad credit, there are still options available to you. Look for lenders that specialise in working with people with bad credit, and be sure to compare rates and terms from multiple lenders before making a decision.