Guaranteed Loan

DEFINITION of 'Guaranteed Loan'

A loan guaranteed by a third party in the event that the borrower defaults. The loan is quite often guaranteed by a government agency which will purchase the debt from the lending financial institution and take on responsibility for the loan.

BREAKING DOWN 'Guaranteed Loan'

This type of agreement is often made if the borrower is an unattractive candidate for a loan. It is a way for people in dire need of financial assistance to acquire funds, without putting excessive risk on the lending financial institution.

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RELATED FAQS
  1. What is the difference between a bank guarantee and a bond?

    Understand what a bank guarantee is and what a bond is, and which one is a debt instrument. Learn the differences between ... Read Answer >>
  2. How is a bank guarantee different from a traditional loan?

    Read about the differences between a traditional bank loan and a bank guarantee, and why a third party might require a guarantee ... Read Answer >>
  3. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
  4. Are secured personal loans better than unsecured loans?

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    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
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    Contact student loan companies before student loans default, as the government has the power to get its money. Prior to default, ... Read Answer >>
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