Guaranteed acceptance loans are quite popular among borrowers as there are no chances of being denied. Well, is that so? Technically, the name suggests that a lender will give you the guarantee that you will get money when you apply for a loan, but there is a catch.
There are some lenders offering payday loans with high acceptance rates, also known as guaranteed loans. These loans involve no credit check. A lender will sign off on your application based on your repaying capacity.
Payday loans are quite popular among bad credit people as they can borrow money without losing their credit points, and secondly, the money is lent quickly. These loans are generally aimed at funding unforeseen expenses. The sooner the money is lent, the better.
Guaranteed acceptance loans involve no credit check – misleading truth
Guaranteed acceptance loans are small emergency loans, with maximum loaning of up to £1,000. Most of the lenders offering such kinds of loans do not run a credit check. As they do not have an idea of your past payment behaviour, they can easily offer you the guarantee of approving your loan application.
This is what brokers must have informed you through their websites, but unfortunately, this move is supposed to be a take-down of independent private lenders.
Undoubtedly, a credit check is essential to assess the level of risk involved in lending. It informs a lender how likely you are to commit to making a default. Not to mention, the higher the risk, the higher the interest rate.
But this just discloses half information a lender needs to decide whether or not they should loan you. Your credit score cannot disclose whether you can repay the debt you are applying for. Your bad credit rating speaks to your financial irresponsibility, but chances are you have justified reasons to have fallen behind in payments.
In some cases, not knowing how your actions, like putting in multiple applications at the same time to get the best interest rates, could affect your credit score and can also be responsible for taking a toll on your credit file.
Well, whatever the reason, you cannot escape its effect on your credit file. Therefore, some private lenders emphasise your repaying capacity, meaning how much money you can actually afford to pay back.
It proves that guaranteed loans for unemployed are subject to specific terms and conditions. You will have to prove your repaying capacity to get the nod from a lender.
Giving the guarantee unless you apply is impossible
Guaranteed acceptance loans are advertised as a loan with a 100% guarantee. It gives the impression that your loan application will be cast aside under no circumstances. Keep in mind that it is a way to draw your attention.
It is anything but possible for a lender to give you a guarantee that you will get money before you even fill in the application form. Though these loans do not involve a credit check, a lender must carefully examine your repaying capacity.
They can get to know whether your budget allows payments only when they peruse your income statement, and that is possible only when you put in a request for a loan.
In cases of other loans, a lender turns you down if they suspect that you cannot afford to pay back the money you are borrowing. Still, since these loans are advertised as guaranteed approval, a lender will loan you less than what you applied for instead of tossing you away if they find that your repaying capacity is not that strong.
How to improve your approval chances
You might consider guaranteed acceptance loans because your credit score is not impressive at all. However, you should still try to do up your credit file so that you can get money at the most competitive interest rates down the road.
Here are some of the tips that will help strengthen your credit report:
- Make sure that you are on the electoral roll. It ensures that you have got a stable address. Some lenders are strict with their criteria.
- Reduce your level of credit utilisation ratio. For instance, if your credit card limit is worth £2,000 and your balance is £1,000, it means your credit utilisation ratio is 50%. Ideally, it should be 30%, the lower, the better.
- Make sure that you pay off all your bills on time. If possible, set a direct debit, so you do not miss the due date.
- At the time of applying for a loan, you should be debt free. However, if you have any outstanding debt, make sure that it does not consume a large portion of your income.
- Look over your credit report to check for any errors that can affect your credit rating. You can get a free copy of your credit file once a year.
All these steps will not reverse the damage you have already done to your credit file, but they will help prevent further damage. Over time the marks showing up on your credit file will become old and hence less likely to affect the decision-making, and after a certain period of time, they will drop off. This is how your credit rating will become better, but this will take a very long time.
For instance, the impact of a missed payment will stay until two years, and the default will stay until six years. You cannot be impatient when it comes to improving your credit score.
The final word
Frankly, loans with a 100% guarantee do not exist. It is not possible for a lender to give a guarantee without checking your income statement. However, there are types of loans that come with the fastest disbursal.
These loans involve no credit check, yet they are subject to affordability. You must have a high income to prove your repaying capacity. If a lender suspects, they will lend you less than what you want to borrow. That seems to be a better way than straightaway rejecting your application. This is why these loans are advertised as guaranteed acceptance loans.