Guaranty Agreement

A guaranty agreement is a legal contract where a third party, called the guarantor, promises to repay a loan or fulfill a financial obligation if the primary borrower cannot. It provides extra security to the lender, ensuring the debt is paid even if the borrower defaults. The guarantor’s obligation is typically contingent upon the borrower’s inability to meet their payment commitments. This agreement clarifies the guarantor’s responsibilities and conditions, offering reassurance to lenders while exposing the guarantor to potential financial risk if they need to step in.