A loan that is “backed” or guaranteed by the Federal Government, such as Veteran's Administration or Rural Development. The guarantee protects the lender against loss by the borrower defaulting on a mortgage.
A pledge to cover the payment of debt or to perform some obligation if the person liable fails to perform. When a third party guarantees a loan, it promises to pay in the event of a default by the borrower.
An arrangement by which the government guarantees repayment of a loan made by a private lender. The Farmers Home Administration may guarantee some loans made to farmers by private banks. The government may guarantee loans made to exporters by private banks to promote more agricultural exports.
Loan in which a private lender is assured repayment by the Federal Government of part or all of the principal, interest or both, in the event of default by the borrower. Unlike an insured loan, no insurance fund exists and no insurance premiums are paid.