A Personal Guaranty Contract is a legal tool favouring lenders. Debts are recovered with this tool even when the property securing the debt has been foreclosed. Regardless of this contract, lenders face some limitations during the recovery process because of deficits. A personal guaranty holds so much valuable protection for private money lenders. These private money lenders usually provide services to borrowers who do not meet the loan requirements for traditional, institutional loans. Most times, these people have guarantors who have substantial personal assets.
Therefore, this document binds the lender and a guarantor. A guarantor is an individual “guaranteeing” repayment of a loan taken by the borrower. If it is appropriately drafted, this document holds the guarantor responsible for any deficit of the borrower. Hence, the private money lenders have the legal power to confiscate the guarantor’s personal assets such as banking accounts, vehicles, real and personal property, and any other liquid assets.
There are two types of personal guaranties; they are unlimited and limited. The complete personal guaranty is provided with the total debt obligation and extra expenses like interest, collection cost, attorney’s fees for enforcement of the contract, and many more. In contrast, the limited personal guaranty limits the lender’s ability to a specified sum of money. There’s always a maximum threshold amount for the borrower’s liability.
For more information on post-foreclosure relief, and how the presence of a guarantor keeps you safe, click here.
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