A bank guarantee means that if someone else (like a borrower) does not pay back their debt, you, as the guarantor, will be responsible for paying it. This includes not only the debt itself but also any interest and other costs. In other words, if the borrower can’t pay, you will step in and cover the amount owed.

Bank guarantees are often used when buying a business, equipment, or property, such as helping your children get a home loan (often called the “mum and dad bank”). While these arrangements are becoming more popular, they do come with significant risks.  The Lender wants to ensure that any guarantor is aware of the implications of the document they are signing and, for this, they will often require a Solicitors’ Certificate confirming same.

Beaumaris Lawyers and Conveyancers frequently provide fixed-price Solicitors’ Certificates for bank guarantees, ensuring a quick and straightforward process at a competitive cost.   We will explain the terms of the document and what it may mean to you as a guarantor.

What is a bank guarantor?

A bank guarantor is a person or entity (like a bank) that promises to pay a debt or fulfill an obligation if the borrower (the person or business taking the loan or credit) fails to do so.

Here’s what a guarantor does:

1. Provides Assurance: The guarantor acts as a backup or safety net for the lender. If the borrower cannot repay the loan or meet the terms of an agreement, the guarantor is legally obligated to step in and pay the debt or cover the costs.
2. Increases Trust: Having a guarantor makes it more likely for the lender to approve a loan or extend credit, as it reduces their risk.  It shows that someone else trusts the borrower enough to take responsibility if things go wrong.
3. Types of Guarantors:
   • Personal Guarantor: An individual, such as a friend or family member, who agrees to take on this responsibility.
   • Bank Guarantor: A financial institution that provides a formal guarantee, often used in business transactions.

In essence, a guarantor provides a level of security to the lender, ensuring that the debt will be paid, one way or another.

Contact us today to arrange a consultation.