A personal guarantee, or “guaranty”, is a document that serves to help give security and help protect a commitment as an attachment to an individual’s assets. This is most common when a person decides to borrow money from someone else and the borrower will seek some sort of pledge that if they are not paid that they will have something to fall back on. In this case the personal guaranty would allow the person that loaned the money to demand assets the borrower owns up to the amount borrowed plus any added interest.
Types of Guarantee’s
There are three (3) main types of guarantee’s;
Personal Loan – To give the person who loaned the money assurance that they will be paid back. Once the loan is in default they may seek financial litigation and obtain possessions that the borrower owns.
Commercial Lease – Common for new or small businesses that do not have much value. The landlord will ask for the owner or the principals of the entity to sign personally so that if the lease goes into default that they the landlord will be compensated through the owners personal assets.
Residential Lease – Seeing as the person authorizing the lease is already signing personally, this is for riskier tenants their family member or friend is willing to stick their neck on the line and sign onto the lease. This means that if the tenant does not pay the person who also signed the guaranty will be obligated to pay the rent that is due and any past amounts.