08 Mar Why Do Some Lenders Offer A Guaranteed Approval?
Why do some lenders guarantee an approval?
Anytime we go to our local bank to apply for an installment loan or personal loan, we always expect some sort of validation or verification process to go along with it. The bank pulls your credit report and likely validates your stated income before making a decision on whether or not to approve your loan request. The terms of your approval also very on the information received in their underwriting process. This is very common and most people don’t seem to expect it when going that route.
On the flip side, there are lenders that verify and qualify you as a borrower to minimum level and guarantee you a loan, often times same day. These lenders often care little about how qualified you may be and more about that you just reach a minimum standard to qualify.
So what makes the second lender able to offer his product to everyone? Is the first lender picky about who they give their installment loans to? Is it because the second is an indirect lender as opposed to a direct lender of installment loans, so they have more lenders available to use? Is it cost?
The majority of the time all three of those statements hold true but it is important to note there will be exceptions as well. (hint: Credit Fair-E)
Often your traditional lending institution or bank, has very specific criteria that needs to be met in order to obtain a loan through them. They are by nature risk averse, and only want to offer loans to people that they feel will definitely pay them back. They will still price your loan according to your credit score. Meaning if you have bad credit, you will likely pay a higher rate than someone w/ good credit. Banks in general though don’t have a habit of providing bad credit personal loans.
When you go to a non-traditional lender that is advertising guaranteed loans, it could be for many reasons. The most common reasons being they are an indirect lender or that they simply charge more for their loans.
An institution offering guaranteed approval loans is often not going to be the direct lender. This is to say that they will actually process your information through several places that will actually be giving you the money and managing your payments. You actually applied online to a site that simply collects all the information about these lenders for you. They can gaurantee a loan simply because there are a ton of lenders at their disposal. Someone, is going to give you that loan. But..
Chances are good, if you are looking for no credit check or bad credit installment loans that you will pay a much higher interest rate or fee than you otherwise would. To be fair, if you have limited or bad credit some of this is to be expected. Be careful though if you have good credit but happen to be looking for a quick fix. Often times a lender who gaurantees a loan doesn’t actually care about your credit score. Therefor, you may be paying the same rate as someone with a 400 credit score. These lenders charge more because the risk of default or people not paying back their loans is higher.
In conclusion, we hope this helps consumers be more aware of what their loan options are and what they really mean to your financial life. If this knowledge helps you make a more informed decision than this was a success post for us. Please note however that as with anything in life, there are exceptions to be noted.
We would like to not-so humble-brag that at Credit Fair-E we pride ourselves on being that exception. Credit Fair-E is a direct lender that offers no credit and bad credit installment loans to consumers. The maximum APR we charge is 36% and we strongly encourage you shop that around to see how competitive we are.
If you found this article because you are actively looking for a loan, you can apply below.