Banks often require personal guarantees when they lend money and can even be required by other entities when contracts are being entered into. It is important to understand personal guarantees and their implications.

At Phelan Independent, we provide specialist legal guidance on personal guarantees to ensure clients understand their rights and obligations before entering such agreements.

What is a Personal Guarantee?

By providing a personal guarantee, the guarantor agrees to be personally liable. This means that their own assets, such as savings, property, or investments, could be used to pay the sum guaranteed. Depending on the terms of the guarantee, they may also be responsible for costs, interest and sometimes future liabilities.

Personal guarantees are usually required by lenders, landlords, and suppliers as a form of security when providing funds, credit or entering contracts with individuals or businesses. Personal guarantees are standard for those with limited credit history or assets.

What are the Risks?

Providing a personal guarantee is not a decision to be taken lightly. Substantial risks include the seizure of assets to cover debt, impact on credit rating, and legal action if unable to fulfil the guarantee.

The Importance of Independent Legal Advice (ILA)

Due to the significant legal and financial implications, seeking independent legal advice before a personal guarantee is entered is vital. Independent legal advice (ILA) assures you are fully advised on your rights, obligations, and potential risks associated with taking on personal liability for someone else’s debts or contractual obligations.

Our ILA Services Include:

• Personalised consultations to evaluate specific situations and the terms of the personal guarantee.
• Our legal experts thoroughly review the agreement to explain the implications and potential risks.
• A comprehensive legal analysis of the personal guarantee document, identifying any clauses or terms that may not be in the guarantor’s best interest.
• Develop custom strategies to reduce risks, including negotiating terms with the other party or exploring alternative financing options.

We help clients through the documentation and process, explaining each step to help them fully understand the legal implications before signing the personal guarantee agreement.

Contact Us
Understanding the consequences of a personal guarantee is vital for protecting financial well-being. Contact us by email enquiries@phelanindependent.co.uk to discuss your Independent Legal Advice requirements.

Frequently Asked Questions (FAQs)

1. What are the risks associated with a personal guarantee?
   When you provide a personal guarantee, you risk personal financial liability. Personal assets such as savings, property, or investments could be used to cover the debt or obligation if the primary borrower defaults.
2. How much does independent legal advice for personal guarantees cost?
   We offer fixed fees starting from £350 (inclusive of VAT), with discounted rates for multiple instructions or clients of NACFB members.
3. When is a personal guarantee required?
   Lenders, landlords, and suppliers often require personal guarantees as security when extending credit or entering into contracts with individuals with a poor credit score, limited assets, cash flow, or smaller or newer businesses lacking credit history or capital.
4. Can the terms of a personal guarantee be negotiated?
   The terms can sometimes be negotiated depending on the lending institution. It’s essential to seek specialist legal advice to fully understand the terms and negotiate better conditions, such as limiting the duration of the guarantee, capping the amount of liability, or including clauses for early release.
5. How long does the process take to provide independent legal advice on personal guarantees?
   We guarantee to provide advice within 48 hours of instruction acceptance and receipt of all necessary documents, usually on the same working day.