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Guaranteed Approval for a Personal Loan – Are They Really Guaranteed?

With the rise of online lending, the notion of ‘guaranteed loan approvals’ has become more and more common both as a marketing tactic, and unfortunately, in many cases as a scam. As a standalone concept, ‘guaranteed approvals’ sound great, particularly for borrowers who may not have the credit history or score required by conventional lenders such as banks.

However, most credible personal loan lenders (conventional or alternative) will likely not advertise guaranteed approval for the simple reason that loans come with specific risks to both the lender and the borrower. Before providing approval, a legitimate lender will ensure that they conduct the right checks and due diligence to protect their own capital, but also prevent borrowers from taking on financial burdens they may not be equipped to take on.

Guaranteed Approval for a Personal Loan – Are They Really Guaranteed?

Does guaranteed approval really exist?

Some legitimate lenders may indeed offer guaranteed approval in their marketing materials. However, even these lenders will ask for and complete credit checks as part of the approval process to ensure that they are adequately managing the risks of lending for themselves, and the risks of borrowing for the borrower. While they may have lower requirements than a traditional lender such as a bank, that still doesn’t necessarily mean a 100% guaranteed approval. At Magical Credit, we do not offer guaranteed approvals. However, we have worked with hundreds of borrowers with low to average credit scores by providing them with the appropriate products that meet their needs while helping them rebuild their credit scores.

On the other hand, there are some fraudulent lenders out there who offer guaranteed approval for even supposedly ‘high-risk’ loans where borrowers have poor credit. This language is used as a means to entice borrowers, but there is often no underlying lending business and the borrower is duped out of their hard-earned money. Some ways to tell between these scams and legitimate lenders are as follows:

  • Search online reviews: If there are a large number of customers that have borrowed from them previously, chances are they are legitimate. However, if you start seeing an abnormal number of negative reviews or customers with unpleasant experiences, then it might be time to reassess whether to pursue a loan with this lender.

  • Additional fees to be paid upfront: Scam lenders will often charge incremental fees (disguised as something like ‘loan insurance’) that they will demand upfront payment for to guarantee the loan outcome. If you see these types of fees, chances are that the lender is not credible.

  • High-pressure sales tactics: The lending industry is highly regulated in Canada and all registered lenders have to abide by these regulations. Some of the regulations stipulate that no lender is permitted to threaten, intimidate or forcefully influence borrowers into obtaining a loan. If you find that the lender is being extra pushy, walk away.

What are your options?

If you don’t have a credit score or history that aligns with the minimum requirements of banks or other conventional lenders, there are several other options that you can potentially explore instead of “guaranteed approval bad credit loans” that you may see on the Internet. Some examples are below:

  • Alternative lenders: Alternative lenders such as Magical Credit are not subject to the same stringent regulations as the large banks. As such, they are able to lend to people whose credit profiles may not be adequate for a bank. Additionally, they also offer more streamlined processes and quicker approvals. Before signing the dotted line though, do your research to ensure that the lender you are working with is truly legitimate.

  • Secured loans: Lenders may also be willing to provide a loan if there is collateral placed on it such as a house or personal belongings. However, be double and triple sure that you will be able to fulfil the ongoing loan obligations each month as a failure to make repayments can cause the lender to seize your assets.

  • Get a co-signer: A co-signer is someone who signs a loan alongside the main borrower which indicates a promise to pay off the loan in case the main borrower is unable to. If your personal credit history is not sufficient to get a loan, a co-signer can be used as a credit enhancer.

How to get approved for a loan?

While there is never really a guaranteed loan approval as discussed above, there are a lot of things that you can do as a borrower to position yourself for success when applying for a loan if you happen to have poor credit:

  • Secure all required documents: At a baseline, you will need a piece of personal ID (a government-issued photo ID), income verification (such as a paystub or tax returns), and proof of residence (utility bills or other such documents).

  • Know your credit score: Get a copy of your credit report and review it to ensure that everything makes sense and there are no errors. If you do spot an error, contact the agency immediately to have it corrected.

  • Build back your credit: If you can start making adjustments to your lifestyle by building a monthly budget, sticking to it, and continuing to make timely repayments, your credit score will inch up over time, and you will soon have access to a greater choice of lenders.

Final Thoughts

While guaranteed approvals sound ideal, the reality is that there is no way for a lender to provide a guaranteed approval if they truly have their borrower’s interests at heart. Ensure that you work with a trusted lender who does not make false claims, and can help you meet your needs while advising you on the right type of loan that will help you repair your credit score.

‘Guaranteed approvals’ sound great, particularly for borrowers who may not have the credit history or score required by conventional lenders such as banks.

Our loans are considered short-term loans and have a 12-60 month term with a fixed interest rate of 3.9% per month.

Example: $1,500 borrowed for one year at 3.9% per month. Monthly payments are $199.05. Total payback with interest and fee of $194.00 is $2,388.54.

NOTE: You can pay off your loan at any time with no penalty. You will only pay interest up to the date you pay it off.

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