January 11, 2008, Newsletter Issue #98: About Guaranteed Loans

Tip of the Week

In the traditional sense of the term, a guaranteed loan is a loan that is underwritten and managed by a financial institution and which a government agency has guaranteed to pay if the borrower defaults. To default on a loan means you do not make payments on time or, in some cases, at all. Examples of these guaranteed loans are small business loans that are guaranteed by the Small Business Administration and home mortgage loans that are guaranteed by the Veterans Administration. The term guaranteed loan has also come to mean an unsecured personal loan that is "guaranteed" by a co-signer. The co-signer promises to pay the debt if the borrower defaults.

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