Guarantor

A guarantor is a person who legally promises to meet a borrower's obligations if the borrower defaults.

Where it appears in property

• Parents guaranteeing a child's first home loan, often secured against the parents' own home
• Directors personally guaranteeing lending to a company or trust
• Trustees guaranteeing trust borrowing

Lending to companies and trusts almost always requires personal guarantees, which substantially undermines the liability protection people believe those structures provide.

What a guarantor is exposed to

Usually the full amount, not a share. If a guarantee is unlimited, the guarantor can be pursued for the entire debt plus costs. Where the guarantee is secured against the guarantor's property, that property is at risk.

Common misunderstanding

A guarantee is not a formality and is very hard to exit. It generally continues until the loan is repaid or refinanced, regardless of changes in the relationship between the parties.

Guarantors should get independent legal advice — lenders usually require it, and for good reason.

"Limited guarantee" is worth asking for. Guarantees capped at a specific dollar amount or to a specific property are sometimes available and are dramatically safer than unlimited ones.

Related terms

Last reviewed: 1 August 2026 · General information only, not financial advice.

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