Personal Guarantees

If you have been asked to provide a personal guarantee on a mortgage loan, you need to get independent legal advice. The lender typically requires this, but it is for your own best interests. Personal guarantees carry risks. You need to be aware of these before signing on the dotted line.

Our conveyancing solicitors offer a fixed fee service for providing legal advice on personal guarantees.

What is a personal guarantee?

A personal guarantee is when an individual (known as the Guarantor) promises to repay a debt should the borrower default on a loan and also for the Guarantor to continue to fulfil the borrower’s obligations.

Personal guarantees are commonly used when a limited liability company buys a property. In this situation, the director is usually asked to guarantee the loan.

What are the risks of a personal guarantee?

Personal guarantees carry risks for the Guarantor. As a guarantor, you are effectively saying that you will take on the debt and obligations of the mortgage should the borrower fail to pay.

If the borrower falls into arrears on the mortgage, the lender will usually give them time to get on top of the repayments. However, if this isn’t possible, the mortgage lender may ask the Guarantor to take over the payments on the loan. The worst-case scenario will be the lender seeking to repossess the property. If you, as a guarantor, cannot or will not fulfil the obligations of the borrowing company, they can look to take personal action against you, which could result in you being bankrupt.

Being a personal guarantor can also have other consequences you might have yet to consider. For example, it can affect your credit rating and your ability to secure future mortgages.

What are the advantages of a personal guarantee?

While personal guarantees carry risks, they remain a powerful financial tool for directors and property investors looking to unlock opportunities. Weighing the commercial benefits against personal exposure is essential before signing. While a personal guarantee carries inherent legal risk, it remains a vital commercial instrument that can unlock critical opportunities for directors, entrepreneurs, and growing businesses. When utilised strategically, personal guarantees offer several advantages:

Unlocking restricted or high-risk finance

Traditional lenders often impose rigid lending criteria, frequently rejecting new start-ups, small businesses with limited trading history, or enterprises with thin balance sheets. Offering a personal guarantee reassures lenders and enables access to capital that would otherwise be out of reach.

Securing more favourable commercial terms

Lenders adjust their pricing to match their risk level. When you guarantee a loan personally, you decrease their potential losses, which opens the door to lower interest rates and fees. In return, institutions are often willing to negotiate significantly better commercial terms, which can include longer repayment windows or more flexible covenant structures.

Accelerating business growth

Access to timely liquidity empowers directors to seize immediate market opportunities, such as acquiring commercial premises, purchasing critical machinery, or funding bulk inventory ahead of peak seasons. This capital supports sustainable commercial scaling, helping businesses achieve strategic milestones far faster than they could through organic cash flow alone.

Demonstrating commitment to lenders

Providing a personal guarantee signals confidence in the business model and its cash flow projections. Aligning personal stakes with corporate success builds trust with institutional lenders, paving the way for smoother future funding rounds and stronger banking relationships as the company expands its portfolio.

Personal guarantee legal advice

Because of the risks involved, you should always get independent legal advice if someone has asked you to be a personal guarantor. The lender usually requires that you get legal advice before approving the mortgage, and with good reason. It isn’t just a box-ticking exercise – you really do need to be aware of the potential risks and implications.​

At Cooklaw Solicitors, we offer a fixed fee service to those providing a personal guarantee. We can explain everything you need to know in plain English. We can also answer any questions that you have, such as:

• What is a personal guarantee on a mortgage?
• How does a personal guarantee on a mortgage work?
• Is a personal guarantee legally binding?
• How do I get out of a personal guarantee?
• Is there a time limit on a personal guarantee?
• Does a personal guarantee show up on your credit report?

We want to ensure you know exactly what you are signing up for. This conversation occurs in the borrower’s absence, and all discussions remain confidential.

Get a free quote from our fixed-fee solicitors

Our residential conveyancing solicitors act on a fixed fee basis. This starts with a free initial consultation. Afterwards, we provide a fixed fee quote with no hidden charges.

If you would like to continue with our services, we will arrange a meeting between yourself and one of our experienced conveyancing solicitors. You will know the fee in advance.

Need a personal guarantee signed off by a solicitor quickly?

We provide a seamless, compliant, and legally binding service tailored to your timeline.

Choose from our standard or express options to keep your business moving forward.

Our pricing

Standard service: £195 + VAT (plus £16.80 ID check)
Urgent express service: £295 + VAT (plus £16.80 ID check)

Call us on 0191 567 7244 , and we’ll be delighted to help. For further advice, you can also email info@cooklaw.co.uk or complete our free online enquiry form and we will be in touch with you shortly.