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Guaranteed Line of Credit

The term guaranteed line of credit has a number of different potential meanings for borrowers.

The lending institution may guarantee that an individual or business can borrow up to a certain amount of money. The most common variety of this line of credit is a credit card. Your spending is limited to a certain amount by using a credit card.

Another definition for this term is that the borrower agrees or guarantees to pay back all or a certain amount of the credit used very quickly. This is how hard money lines of credit work the borrower can get certain amounts of money almost immediately but has to pay it back very quickly.

Yet another use of guaranteed line of credit is for a line of credit that is secured or guaranteed by some sort of collateral. A popular example of this would be a home equity line of credit which is secured by equity in a borrower’s home. Another example would be loans from a pawn broker which are secured by property such as jewelry or a title to a vehicle.

Guaranteed Lines of Equity Credit

There are many lenders that make guaranteed lines of credit available. Equity or private lenders will provide businesses lines of credit secured by equity in property.

Many lenders will provide guaranteed lines of credit secured by equity in real estate. Others will ask the business to use equipment or inventory as collateral for this kind of loan.

A popular guaranteed line of credit is based on accounts receivable.  The business provides a portion of its accounts receivable as equity for the line of credit.

Guaranteed Lines of Credit Payback

The reason lenders want collateral is to guarantee that they will at least recover part of their investment in the line of credit if the borrower doesn’t pay them back. This is how a pawn shop works the pawn broker simply takes ownership of the property and sells it to recover his costs.

It is also how an equity lender works; the equity lender forecloses on the property or places a lien on it. The borrower will then have to pay off the lien or have the property seized and sold to recover the borrower’s losses.

Advantages to Guaranteed Lines of Credit 

The biggest advantage to a guaranteed line of credit is that it maybe possible to get such a line of credit without a credit check. It is often possible for those who have a bad credit rating to get a guaranteed line of credit.

Another advantage to a guaranteed line of credit is that you can get it very quickly. Since the lender doesn’t need to run a credit check there is less time and less paperwork involved. This can increase the speed of approval and the chance of approval.

For those who need credit a guaranteed line of credit is one of the best sources of financing available.