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?
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?
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.