Function / Process

• In its most basic form, the approval process for guaranteed approval personal loans is very similar to the process for other personal loans: a prospective borrower submits an application, an automated system checks the borrower's history and credit score, and a lending decision is made. This automated process takes only a matter of seconds, but is only the beginning for many applicants. If the automated system returns a denial of credit (known as a "decline reponse"), agents at the lending institution get to work finding alternative services for the applicant. These services might include loans with considerably higher interest rates, secured loans, or secured credit cards. If the borrower does not qualify for a loan of any kind, the lender will generally offer the option of a cash advance service, fronting the necessary funds, verifying employment and banking situations, and drafting repayment from the borrower's bank account when his or her next paycheck is deposited.
  
  

Types

• While they all loosely fall under the same umbrella term, there are several varieties of "guaranteed approval" personal loan products. These types include traditional personal loans, secured personal loans (in which the lender places a lien on ownership of some property to protect its financial interest in the loan), secured credit cards (credit cards backed by a deposit savings account funded by the borrower), and cash advance loans (described in Section One above).
  
  

Misconceptions

• The very name of "guaranteed approval personal loans" is essentially a misnomer. While the lending institution may take extraordinary steps to secure financing for its applicants, lenders like Money Now! USA explain that some applicants will not qualify for personal loans. Instead, these applicants are generally offered one of the alternatives to personal loans listed above. Even with these options, borrowers with significantly damaged credit, no credit history at all, or no source of income may not qualify for any financial services.
  
  

Considerations

• Any form of loan, debt, or financing arrangement should always be approached with great caution. "Guaranteed approval" personal loans should be considered with exceptional candor, though, as these programs are often geared toward borrowers considered high-risk by lenders; with a high-risk assessment, these loans are generally more expensive and may carry high fees or interest rates which could be avoided with more traditional financial products. Money Now! USA, for example, lists the APR for it's "Very Bad Credit" installment loans as 24% - 96%, and an APR of up to 25% for it's "Bad Credit" loan products. With such high interest rates, guaranteed approval personal loans may be an option of last resort for many borrowers.
  
  

Benefits

• Despite the apparent financial pitfalls of guaranteed approval personal loans, these products do serve some benefit. Most apparent of these benefits is the ability they extend to borrowers with very bad credit to obtain financial support in difficult times when all other options have been exhausted. These loans can be critical lifelines for some borrowers who would otherwise lose their homes or utilities, or be unable to eat, without some form of financing. When used with extreme caution and due dilligence, guaranteed personal loans can provide a necessary service.