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Personal guarantees

Are the terms, “personal guarantee” the same as “unsecured”?

I understand the risk a lender takes by providing an unsecured loan, but would a personal guarantee make a difference?

One Response to “Personal guarantees”

Barton Goth, GCO Inc. Bankruptcy Trustees said...

A personal guarantee is usually used when business debt is involved. Many lending organizations will not even consider lending a new business money without having the directors personally guarantee these debts will be paid in full in the event that the business is not successful. Now whether this is a secured or unsecured debt really depends on the context. While most personal guarantees are typically unsecured, I have seen many personal guarantees where the director has pledge personal assets as security and are therefore considered secured debts. If there is a question you can first consult with the original documents that were signed and see if any of the directors personal assets were identified, or alternatively do a search under the Personal Property & Security Registry.