What is a guarantee?

A guarantee is a financial warranty or endorsement that is granted to a person or entity to support an obligation or debt. In other words, when someone guarantees another person, they agree to respond financially in case that person does not meet their payment commitments. The guarantor becomes responsible for the debt in the event that the main debtor cannot pay, so it is recommended that the guarantor carefully assess the implications and risks before accepting the charge.

The guarantee can be used in various situations, such as bank loans, lease contracts, purchases on credit or other financial transactions. The guarantor assumes the responsibility of paying the debt if the original debtor does not, which provides security to the creditor or financial institution.

Related concepts

• What is the difference between a deposit and a guarantee?
• Deposit