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What is a Guaranteed Personal Loan?

Guaranteed personal loans tend to attract those who've either faced challenges with their credit history or are on the lower end of the income scale — after they’ve struggled to find other loan options. 

September 9, 2021

You know the old saying, “There are no guarantees in life except death and taxes?” It’s a good rule to live by when learning how to temper expectations. 

If this adage rings true for you, it can be surprising when you come across guaranteed personal loans. While guaranteed personal loans may be a “sure thing,” they often come with a catch. If you have bad credit and are trying to secure a loan, companies advertising guaranteed personal loans may pique your interest. 

Let’s run through what is a personally guaranteed loan, how guaranteed personal loans differ from traditional loans, and the downsides of guaranteed loans you should watch out for. 

What is a Guaranteed Personal Loan?

Personal loans allow consumers to borrow money to make large purchases (like funding a home renovation) and pay back what they owe over a set period. Guaranteed personal loans tend to attract those who've either faced challenges with their credit history or are on the lower end of the income scale — after they’ve struggled to find other loan options. 

When it comes to guaranteed approval for personal loans, some lenders claim that they don’t do a credit check and that your approval is a sure thing. In many cases, these offers are too good to be true, so do your research before accepting a guaranteed personal loan. Reputable lenders typically do credit checks before approving their customers for loans. Unfortunately, you tend to end up with hefty fees and high interest rates in exchange for the allegedly guaranteed approval. 

If you’re seeking out guaranteed loans, you may come across payday loans and other short-term loans that can be problematic. In some cases, guaranteed loans can be short-term installment loans. These loans are usually on the smaller side but have longer repayment periods. That can seem like a good thing if you can’t afford to make large monthly payments, but you may end up paying a lot in interest over the life of the loan. 

What Does Applying for a Guaranteed Personal Loan Look Like?

Unlike a typical personal loan that requires a credit check during the application process, many lenders who offer guaranteed personal loans don’t consider your credit. Instead, they’ll likely weigh other factors more seriously during the application process, such as your income and debt-to-income ratio

After being approved for a personal loan, the funds will be delivered straight to your checking account. Repayment of the loan typically starts within 30 days. If your personal loan comes with a fixed rate, your payments will be the same every month until you pay off the loan. However, if you have a variable-rate loan, the interest rate can change over time, and it could be harder to anticipate your monthly payments.

How is it Different From a “Traditional” Loan? 

One of the main differences between applying for traditional personal loans and guaranteed personal loans is the lack of credit checks during the application process. Most legitimate lenders will do a hard or soft pull on potential borrower’s credit histories. They also tend to verify income and your other debt obligations. However, some personal loan lenders may skip these steps during the application process. 

Alongside the high interest rates and fees that can come along with guaranteed approval of personal loans, you may also end up dealing with a predatory lender. Be wary of any lenders who aggressively pursue your business — if they come to you, that’s a major red flag. You’ll also want to make sure they answer all of your questions and don’t pressure you into taking on a higher loan amount than you’re comfortable with. It can be helpful to review potential lenders in the Consumer Financial Protection Bureau’s Consumer Complaint Database before making any loan agreements.

What is a Personally Guaranteed Loan?

When researching guaranteed personal loans, you may come across personal guarantee loans. A personal guarantee sounds like a guaranteed personal loan, but these are two different things. 

What is a personally guaranteed loan? A personal guarantee is a specific type of loan agreement in which the lender can take hold of the guarantor’s (aka someone who promises to pay the debt off on behalf of the debtor if they default) assets in the case of a default. Of course, as a borrower, you won’t be the one agreeing to a personal guarantee of payment, but if you have poor credit, you may enlist someone to do this on your behalf. 

What Strings Come with a Guaranteed Personal Loan?

Guaranteed personal loans may seem like the perfect borrowing solution if you’re struggling to qualify for a traditional personal loan. Still, there are some major strings attached to guaranteed personal loans that you should be aware of. 

  • High-interest rates. Having high-interest rates can make it challenging to pay back your loan on time. 

  • High fees. Double-check the fine print on your loan agreement to make sure you’re aware of any fees you might run into, like origination fees and prepayment penalties.

Between the high fees and interest rates, taking on a guaranteed personal loan can cause the borrower to enter a dangerous cycle of debt that is hard to get out of. If you truly have no other borrowing options, it may be a better idea to spend some time improving your financial health, so you qualify for better loan products with fairer interest rates and fees. 

In What Cases Might a Personal Loan Make Sense? 

There are a few different scenarios where personal loans can really come in handy. Let’s look at some examples.

  • Debt consolidation. Consolidating multiple forms of high-interest debt into one personal loan payment with a lower interest rate can save you money and make it easier to manage your debt. 

  • Medical bills. If you’re struggling to pay for medical bills, a personal loan can break down what you owe into more manageable payments. Try to negotiate your bills down with the medical provider first so you can take out as small of a personal loan as possible. 

  • Home repairs. If your roof is leaking or your air conditioner tapped out just before summer, you may want to lean on a personal loan so you can get vital repairs done sooner rather than later. 

  • Divorce. Just like getting married, dissolving a marriage can be expensive. A personal loan can help cover legal fees and the increased living expenses that come with a divorce. 

  • Moving expenses. Moving is expensive, but often very necessary. If you can’t afford to fund the entire cost of a move out of pocket, a personal loan may be able to make covering the costs of moving more manageable.

For some borrowers, a guaranteed personal loan may feel like their only option to secure funding. However, before agreeing to a guaranteed personal loan, you should research other options and read the fine print.  

If you’re considering a guaranteed personal loan to resolve credit card debt, check out Tally first. The straightforward debt repayment tool can help you keep track of all your credit card debt in one place, helping you get debt-free smarter and faster.

Is your credit card debt putting a strain on your finances? Tally† can help you pay down your debt faster, so you can make your money work better for you!

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.