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25 Simple Loan Personal Guarantee Forms (Co-Signing a Loan)

A loan personal guarantee form is a formal document that allows an individual (guarantor) to be liable for loaned money if the debtor/borrower does not pay it back.

The document also gives the lender/creditor an added security blanket that usually allows the debtor access to better financing options, including better interest rates, high loan limits, etc.

A personal guarantee is defined as a form of an unsecured loan agreement that allows the creditor to acquire the guarantor’s personal assets if the associated debtor fails to pay back the loaned money. Usually, the guarantor agrees and promises to pay the debtor’s debt in case of a default. By signing a personal guarantee form, it means that the individual agrees to assume the responsibility of paying back the remaining balance on behalf of the debtor if they default on their loan.

Generally, a guarantee benefits both the creditor and the debtor. Through the document, a creditor is assured of the security of their loan, and the debtor is eligible to receive a loan that they might not have otherwise been able to receive without the assurance of the guarantor. Usually, this is the case for borrowers with poor or low credit scores.

Alternate names

A loan personal guarantee is also sometimes known as:

  • A guaranty
  • A personal/corporate guarantee
  • Third-party guarantee
  • Guaranteed loan
  • Co-signing a loan

Who are the parties involved

The Parties in a guarantee refer to people or entities with an obligation to fulfill specific responsibilities in the agreement. In most cases, the primary responsibility of these parties is paying back all the money.

The parties involved in a personal or corporate guarantee include:

  • The creditor/lender: This refers to the party that receives the benefit or payment under the original contract between the lender and the borrower/debtor.
  • The debtor/borrower: This is the party that is originally obligated to perform the obligation under the contract
  • The guarantor: This is the party that guarantees that the debt (obligation) will be repaid.

Release of Personal Guarantee Form: It is used to release the personal guarantor from the loan agreement after the complete payment of debt.

How It Works?

Loan personal guarantee forms are regarded as unsecured debt for business because they are not backed by any specific collateral from the organization but by personal assets belonging to the guarantor. For creditors, having a guarantor sign the loan personal guarantee form provides them with a level of assurance that their loan is secure. There are two methods the guarantor returns the loan to the lender in case a borrower defaults it in a personal loan guaranty.

These include:

  • Limited guarantee: This type of personal loan guarantee allows lenders to collect either a certain or a specific percentage of the remaining balance from the guarantor. Usually, this applies only where several guarantors will pay portions of the debt. In such conditions, the amount must be clearly stated in the guarantee document.
    A limited guarantee is sometimes seen in mortgage agreements where, instead of leveraging their entire property as loan security, the guarantor is only liable for part of the repayment as stated in the guarantor loan agreement.
  • Unlimited guarantee: An unlimited guarantee is where the guarantor gets liability for the whole remaining balance. He/she is required to pay all the remaining balance of the loaned amount. If a debtor cannot fulfill their obligations on loan with an unlimited guarantee, then the creditor reaches out to the guarantor to get all the remaining balance. A good example of an unlimited guarantee is the loan personal guarantees required by the SBA.

Entities Requiring Loan Personal Guarantee Forms

The use of loan personal guarantee forms is common with particular organizations, groups, or individuals.

These include:

Trading companies

Trading companies usually enter into various types of transactions with other institutions and need a loan personal guarantee form or letter.  These companies will use the form or letter to document that the company will trade to personally guarantee that they will act accordingly based on the terms and conditions set in the agreement. Moreover, the form specifies the State laws that regulate the guarantee and agreement during the entire term of the transaction.

Lease property owners and landlords

Lease property owners and landlords often use guarantee forms. With the form, the owner or landlord of a property has the assurance and legal documented proof that the tenant or renter has a guarantor who will pay any rent dues in case of a default. The form also provides overall information concerning the guarantor, including their contact details, that a landlord can utilize to send the guarantor notices of the unpaid rental fees or payment details.

Hiring managers

A firm’s hiring managers may use guarantee forms to clarify and verify applicants’ employment claims and backgrounds. The hiring managers will use the form to gather more information regarding the guarantor, the applicant, and the previous company (s) where the applicant worked.

The loan personal guarantee form will also contain the guarantor’s assessment concerning the applicant’s performance and their strengths and unique qualities while working in the previous company. In general terms, the guarantee form serves as a supplement document for the applicant’s character reference and application.

Insurance providers

Insurance providers also use loan personal guarantee forms for record-keeping of the applicant’s basic information and the guarantor who will take on the responsibility of making payments if the applicant does not live up to their financial obligation of retaining their insurance cover. In such cases, the applicant might have several personal guarantors.

Besides, insurance providers include the terms and conditions that the applicant should agree to and follow in the agreement. All the involved parties must read these terms and conditions and comply.

Difference Between Corporate and Personal Guarantor

One prominent distinguishing feature between a corporate and personal guarantor is that: a personal guarantor is an individual that agrees to take on the obligations of a debtor or debt, while a corporate guarantor is a company that takes on payment responsibilities of a debtor’s debt.

Personal guarantees have benefits. The most significant benefit of a loan personal guarantee is that it provides a business or individual access to funds that could not have otherwise been available to them due to the high risks involved or lack of credit history. The money can stimulate growth within the organization and provide financial aid to the product development and research areas, essential for small and medium-sized businesses, especially during their initial stages.

The costs associated with personal guarantees are, however, inevitable. Often, lenders charge high-interest loans and require equity to compensate for the risks that they are taking by loaning these businesses based on loan personal guarantees. Besides, lenders require the formulation of business plans and growth trajectories appealing to them, and creating these memos takes a lot of time and effort from entrepreneurs.

Components of a Loan Personal Guarantee Form

A loan personal guarantee form outlines the entire loan balance and the specific conditions in which the lender grants the loan. Because lending standards vary from state to state, a personal/corporate guarantee form must include the following key details:

The total balance of the loan

Each personal loan guarantee form or letter must include essential details of the total balance in a loan that the guarantor must pay to cover the debt entirely.

The State in which the loan was granted

The standards of lending money vary from state to state. Therefore, specifying the state in which the loan was granted initially makes things much clearer and understandable for all the parties involved.  Specifying the loan’s origin also helps both parties to determine the legal context and explicit provisions to include in the loaning contract.

 Names and addresses of the parties

A personal loan guarantee form or template is a legal document. And like any other formal legal document, it should include the basic information of the debtor, including their full name, email, and mailing addresses. The document should also include the names, contact information, and addresses of the guarantor and lender.

Declaration of any limits to the guarantee

This may include a statement indicating the maximum amount of money that the guarantor may be required to pay if the debtor is unable to settle the loan.

The date of execution

This is the date that the loan personal guarantee form is enacted and executed. Make sure to include the current date of signing the document.

Signatures of the parties involved

Since the personal guarantee form is a legal document, it ought to be signed by all the involved parties to show that they have read and understood the terms of the contract and they agree to it by providing their official signatures. The document should also be witnessed, and a witness’s signature should also be provided.

Notary acknowledgement

A loan personal guarantee form ought to be notarized to be legally binding. Another individual who is not part of the loan personal guarantee agreement should witness the signing of the document and provide some kind of authoritative symbol to make it legally binding. This is usually a notary citizen or public who notarizes the document and makes it legal.

Finally, the copies of the agreement are distributed to all the parties of the contract for record-keeping purposes.

Download Free Templates

Being a debtor’s personal guarantor is a big risk. Before agreeing to become a guarantor, you should consider all the associated risks and gauge if it is worth it. However, if you have considered all your options and you’d want to create your loan personal guarantee form, download free and customizable personal guarantee forms from this site, and create a professional document online. Download Our templates today to avoid missing out on any vital information.

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    Tips for the Guarantor

    Before agreeing to become a personal guarantor for an individual, consider a few important tips at the back of your mind:

    These include:

    • Closely monitor your finances or business and establish how stable you are financially before taking the risk.
    • Understand the possibility that despite your purest intentions to help and your best efforts, you might be forced to repay back the loan if the debtor is unable to pay.
    • Consider all the possible ways or how each provision within the agreement is likely to affect your business or finances in the future. Remember,  if the debtor defaults on a loan, the creditor has a legal right to seize your personal assets and property to recover their money.

    Most people might have experienced either asking for a guarantor or being asked to be one for someone else as a requirement in applying for a personal loan. As a guarantor, it is essential to note that you will be responsible for paying back the remaining balance of a loan if the borrower cannot pay the amount fully. For borrowers, it is easier to access a loan with a personal or corporate guarantor. The use of a loan personal guarantee form or letter is imperative if one decides to become a guarantor for a debtor

    Frequently Asked Questions

    What information needs to be in a guarantee?

    A guarantee should contain the total loan balance, the state in which the original contract between the lender and debtor was executed, the name and addresses of the parties, the date of execution, the signature of the involved parties, a witness’s signature, and a notary acknowledgment.

    What is the difference between a corporate and a personal guarantor?

    A personal guarantor is a person who agrees to assume responsibility for debt for a debtor, whereas a corporate guarantor is a corporation that takes on payment responsibilities of a loan if a debtor breaches their loaning terms.

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