Personal Guarantee Legal Templates

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personal guarantee legal documents

What is a Personal Guarantee?

A personal guarantee is a legally binding agreement in which the guarantor assumes responsibility for repaying a loan or debt in case the borrower fails to do so. This type of guarantee is often used in personal loans and mortgages, and the guarantor’s creditworthiness is usually taken into account when determining the loan amount and interest rate. Alternatives to a personal guarantee include co-signing, which involves having a friend or family member co-sign the loan with you to improve your chances of getting approved, or securing the loan with collateral.

Why Do You Need A Personal Guarantee?

Entering into a personal guarantee can be a significant financial obligation. In the event that you are unable to repay a loan or debt, your guarantor is legally responsible for repaying it. Additionally, if you have a personal guarantee on any assets or credit lines, the creditor has the right to seize those assets in the case of default. It’s important to carefully consider the risks and responsibilities before entering into a personal guarantee, and only do so when it is deemed necessary. Other terms for a personal guarantee include co-signing, co-borrowing, and suretyship.


A lawyer can provide valuable insight and expertise when it comes to drafting and negotiating complex contracts. They have the knowledge and experience to ensure that all terms are fair and legally binding, protecting the interests of all parties involved. By working with a lawyer, you can avoid costly mistakes and ensure that your contracts accurately reflect your intentions. Our services are also highly affordable, starting at just $89 per hour, making it a cost-effective way to secure your financial future.

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Personal Guarantee FAQ

Q: How does a personal guarantee differ from a regular loan?

A: A personal guarantee is a type of guarantee that is used in personal loans and mortgages, where the guarantor takes responsibility for paying back the loan in case the borrower defaults. In contrast, a regular loan is a loan agreement between the lender and the borrower, with no involvement of a third party as a guarantor.

Q: What is considered when evaluating a personal guarantee?

A: When evaluating a personal guarantee, the creditworthiness of the guarantor is usually taken into account. This includes factors such as the guarantor’s income, credit history, and financial stability. The lender may also consider the assets and liabilities of the guarantor to determine their ability to repay the loan in case of default by the borrower.

Q: What are the risks of being a personal guarantee?

A: The main risk of being a personal guarantee is that the guarantor may be held responsible for paying back the loan if the borrower defaults. This can have a significant impact on the guarantor’s finances and credit history. Additionally, the lender may have the right to seize the guarantor’s assets to recover the loan in case of default.

Q: Is a personal guarantee required for all types of loans?

A: No, a personal guarantee is not required for all types of loans. It is typically used for personal loans and mortgages, where the borrower may not have a strong credit history or sufficient assets to secure the loan.

Q: Can a personal guarantee be discharged or terminated?

A: In some cases, a personal guarantee can be discharged or terminated under certain circumstances, such as the loan being fully paid or the borrower filing for bankruptcy. However, the specifics of discharging or terminating a personal guarantee can vary depending on the terms of the loan agreement and the laws of the jurisdiction in which the loan was made.

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