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What is a Federal Loan Guarantees?

Rodney Fox

in Student Loans

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Alexa Spicer on August 18, 2018

A Federal Loan Guarantee is a promise to a Lender of record that if the Lender makes a loan and services a loan under an Agency's program guidelines and that loan subsequently goes into default, the Federal Government will honor the guarantee by buying the defaulted loan. The impact on the Lender is promoting loan of decisions where it might not otherwise be a loan.. Often, Lenders will not make a loan to a worth of a small business or rural development, due to the increased perception of the risk of these types of client. The loans are readily available for the economically disadvantaged (low risk rated) to customers. The Loan Guarantee supports lending to the areas of opportunity with price and time comparable to those offered better risk rating of the customers. So the credit is reasonably available to specific sectors of public policy and targets achieved.


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