There are payday loans out there that are guaranteed, but they’re only guaranteed by the post-dated check that you give to the lender. Some would consider payday loans to be secured loans since the loan is “secured” by the check you give them. And others would say that payday loans are unsecured loans since you don’t have to offer any actual collateral. Basically, there’s no universal way to classify payday loans. Plus, they come in many different shapes and sizes, so they may differ based on where you live.
Payday loans are technically unsecured loans since you don’t have to offer any collateral in order to receive one. But as we mentioned above, there are those who might consider them to be secured or even guaranteed loans. So what are guaranteed loans? Great question!
A guaranteed loan is defined as a loan that a third party pays off if the initial borrower fails to repay the loan. This is seen most often with mortgages. There are some guaranteed mortgages that the government offers to repay to the lender if the borrower defaults.
Based on this definition, payday loans wouldn’t be considered guaranteed loans since no one is paying it for you if you default. The reason some might consider a payday loan to be a guaranteed loan is that you give the lender a post-dated check for the total amount due at the end of the loan term. So if you default on the loan, the lender will still cash this check and get their money back. So from the perspective of the lender, repayment is usually guaranteed once they have that check and you’ve signed a contract.
The most important thing to remember, whether you’re applying for a payday loan, guaranteed mortgage, or secured loan, is that repaying on time is crucial. Borrowers who fail to repay their loans on time face consequences like lower credit scores and higher interest rates in the future.