Personal Guarantee
A personal guarantee is a promise made by an individual to take responsibility for a debt or obligation if the primary borrower fails to pay. This is often required by lenders when businesses apply for loans, ensuring that the owner or a key individual will repay the loan, even if the business cannot. If the borrower defaults, the lender can pursue the guarantor's personal assets to recover the owed amount. It provides additional security for lenders but poses a significant risk for the guarantor, as their personal finances can be affected.
Additional Insights
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A personal guarantee is a commitment made by an individual to be responsible for repaying a loan or fulfilling an obligation if the primary borrower fails to do so. This means that if a business takes out a loan and cannot repay it, the lender can seek payment from the individual who provided the guarantee, usually the business owner or a key stakeholder. Essentially, it offers the lender added security, as they can pursue the guarantor's personal assets to recover the debt. It’s an important consideration for anyone taking out loans or credit on behalf of a business.