What is a Guaranteed Personal Loan?

A guaranteed personal loan, often referred to as a payday loan, is a relatively small loan typically given to people with poor credit at an extremely high interest rate. A guaranteed personal loan will often be due within one or two weeks -- as soon as the borrower receives a paycheck. There are virtually no restrictions on how the money from this loan can be used, but many people use this type of loan to pay bills that come in while they are between paychecks. These loans are called "guaranteed" because it is very difficult to be denied this type of loan -- though not impossible.

A guaranteed personal loan requires an application process, but it is designed to be short. Most guaranteed personal loans do not require a credit check, but will instead require the borrower to be at least 18 years of age and to show proof of employment and amount of income. Based on the amount of income the borrower is anticipating for his or her next paycheck, the lender will determine the maximum amount of the personal loan.

The amount of a guaranteed personal loan is typically under $1,000 US Dollars (USD), and is typically just a few hundred dollars. Interest rates for guaranteed personal loans can vary from ten percent to more than 35 percent. The application and approval process can be completed entirely online or at a payday advance lending center, and the money is generally direct-deposited into the borrower's account within 24 hours. In general, the loan must be repaid in full on the due date, though the precise terms of the loan will be specified once the borrower has been approved.

In addition to these short-term payday loans, there are guaranteed personal loans available with longer terms and a more flexible repayment schedule. Otherwise, these loans are very similar, and often feature the same extremely high interest rates. It is typically recommended that consumers apply for a guaranteed personal loan only as a very last resort.

Instead of a guaranteed personal loan, one might consider other types of credit. Banks offer both secured and unsecured personal loans, often at lower interest rates. Someone with poor credit might be able to receive a personal loan by securing it with collateral, such as a vehicle, or finding someone to co-sign the loan. Another option is a credit card. Some credit cards are designed for those with poor credit, and they have a low maximum and a high interest rate. Charging on a credit card and paying it off in full every month will not only save money on interest, but will help build better credit.