Promissory Note Individual

What Is a Guarantor? A guarantor is a financial term describing an individual who promises to pay a borrower's debt in the event that the borrower defaults on their loan obligation. Guarantors pledge their own assets as collateral against the loans.

A promissory note is a legal document signed by a debtor who promises to pay a debt in a form and manner as described in the document. A personal guaranty, as defined at businessdictionary.com, is an agreement that makes one liable for one's own or a third party's debts or obligations.

Borrower: The person who is borrowing money from a bank, money lender or financial institution.Guarantor: If you are a guarantor on someone else's loan, you are promising to the lender that you will repay the borrower's loan if the borrower does not repay.

A guarantor is someone who signs a guarantee on behalf of a borrower when they apply for a loan. By doing so, they become legally responsible for paying back the lender if the borrower defaults on the loan. This is different from a co-borrower, who signs a loan with someone and is jointly responsible for repayments.

Another important distinction to remember is that a co-borrower is primarily liable for the debt from its inception. In contrast, a guarantor is not liable unless the underlying borrower defaults and, depending on the terms of the guaranty, the lender pursues collection efforts against the borrower.

The lender holds the promissory note while the loan is being repaid, then the note is marked as paid and returned to the borrower when the loan is satisfied. Promissory notes aren't the same as mortgages, but the two often go hand in hand when someone is buying a home.

If he doesn't comply, you can show him the rulebook. According to the rule of subrogation under the Indian Contract Act, the guarantor has the right to recover the money later from the borrower, says Panigrahi. Subrogation means stepping into the shoes of someone else (in this case, the guarantor becomes the lender).

That's why your promissory note could include a personal guarantee. Since a promissory note is basically just an IOU, a lender will want some kind of collateral to secure the loan.With a business loan, a personal guarantee means that you -- not your business -- are personally responsible for the loan.