How does a personal guarantee affect collection when the primary debtor defaults?

How does a personal guarantee affect collection when the primary debtor defaults?

• A. It provides an additional remedy against the guarantor if the primary obligor defaults.
• B. It relieves the lender of any rights to pursue the guarantor.
• C. It doubles the amount owed automatically.
• D. It has no effect on collection actions.

Answer: (A)

When a personal guarantee is in place, the guarantor agrees to pay the debt if the primary borrower doesn’t. If the primary debtor defaults, the lender has an additional path to recover money by pursuing the guarantor. The guarantor becomes a secondary obligor, liable for the amount guaranteed up to its terms. This does not remove the lender’s rights against the debtor, nor does it automatically double the debt. It simply adds a personal liability route for collection when the borrower fails to pay.

When a personal guarantee is in place, the guarantor agrees to pay the debt if the primary borrower doesn’t. If the primary debtor defaults, the lender has an additional path to recover money by pursuing the guarantor. The guarantor becomes a secondary obligor, liable for the amount guaranteed up to its terms. This does not remove the lender’s rights against the debtor, nor does it automatically double the debt. It simply adds a personal liability route for collection when the borrower fails to pay.