Should I Give A Personal Guarantee On A Loan?

People regularly ask whether they should give a personal guarantee for a business venture or a loan for personal items such as a car on behalf of a spouse or child.

Signing a personal guarantee means that on the default by the borrower of any of the terms of their loan, the lender, usually a Bank, Trust Company or Finance Company, can ask the guarantor to make good on the default.

The lender is not required to seek the money from the borrower but can approach the guarantor first without any further steps. If you are guaranteeing a loan, your assets could be subject to seizure or your wages garnisheed if you do not make good on the loan.

If you have any question as to whether the person borrowing the funds can make repayment, you should be aware that there is a possibility that you will be asked to take over their obligation. You should carefully consider the risks before agreeing to give a personal guarantee.


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