A “Loan Personal Guarantee” is a legal commitment made by an individual (the guarantor) to repay a loan if the primary borrower (such as a business entity) fails to fulfill their repayment obligations. In essence, it serves as a form of collateral for the loan, providing the lender with additional assurance that the borrowed funds will be repaid, even if the primary borrower defaults.

Many lenders require personal guarantees, especially for loans to small businesses, startups, or entities with limited credit history or collateral. Personal guarantees help mitigate the lender’s risk by providing an additional layer of security beyond the assets of the borrowing entity.

But meanwhile, Providing a personal guarantee can have significant implications for the guarantor’s credit and finances. If the primary borrower defaults and the guarantor is required to repay the loan, it could negatively impact their credit score and financial stability.