What it is
A personal guarantee is a promise from a director or owner to repay a business debt if the business cannot. It turns a company debt into a potential personal one.
Limited and unlimited guarantees
A limited guarantee caps your liability at a set amount or percentage. An unlimited guarantee can cover the full debt plus costs.
Before you sign
- Ask whether the guarantee can be capped
- Check whether it is secured on your home
- Understand when the lender can call on it
- Take independent legal advice
Insurance
Personal guarantee insurance can cover part of your liability if the guarantee is called. Compare its cost against the risk.
Common questions
Can a lender take my house under a guarantee?
If you cannot pay a called guarantee, the lender can pursue your assets through the courts, and some guarantees are secured directly on property.
Can I be released from a guarantee?
Only with the lender's agreement, often after refinancing or repaying the loan.
This guide is general information, not personal financial advice. If you are worried about debt, free help is available from MoneyHelper, StepChange and Citizens Advice.