Also called: Guarantee, Guarantor
Personal guarantee
A personal guarantee is an undertaking by an individual to repay another party's debt if that party defaults. In business lending it is usually given by directors, trustees or shareholders and can extend to the guarantor's personal assets.
What is a personal guarantee?
A personal guarantee is an undertaking by an individual to repay another party's debt if that party defaults. In business lending it is usually given by directors, trustees or shareholders and can extend to the guarantor's personal assets.
Example
A guarantor who owns a home and signs an unlimited guarantee for a $300,000 facility could see that home exposed if the business fails.
Why it matters
Guarantees can be limited by amount or by specific security, and it is worth asking whether a limit is available before signing.