Deed of Guarantee
Our do-it-yourself document generator simplifies the process of drafting a custom Deed of Guarantee. Your custom document will be ready in minutes.
How does it work?
Our intuitive tool will guide you through the process step-by-step from start to finish. It’s quick, easy and simple to understand – just how legal documents ought to be.
The expert interview wizard will help you answer a few questions and prepare your document in the background. You’ll have your custom Deed of Guarantee in 10 minutes or less.
What is a Deed of Guarantee?
A Deed of Guarantee is a document that names a guarantor who secures the repayment of a debt and becomes responsible for a borrower’s obligations should the borrower default.
In lending and borrowing situations, a Deed of Guarantee helps puts lenders at ease because it ensures the loan will be repaid, if not by the borrower (the ‘principal obligor’), then by the guarantor.
Business owners can be guarantors for money loaned to their company, in which case your personal assets will secure the debt. Conversely, a company may be the guarantor for an individual such as its owner, and the company’s assets will secure the debt.
When should I use it?
The Deed of Guarantee should be used if you would like to secure a debt with a lender as guarantor.
NOTE: You should always seek legal advice before becoming a guarantor of someone else’s loans. Responsible lenders will always require a certificate from a lawyer that they’ve explained the possible consequences of providing a guarantee.
What topics does the Deed of Guarantee cover?
- Preservation of obligations
- Limitation of rights
- Effect of Insolvency Event
What are the main decisions I need to make in creating a Deed of Guarantee?
- Who will be responsible for costs? — The default position is that each side will be responsible for its own costs in negotiating, preparing and executing the guarantee(s).
- Do you want the benefiting party to freely transfer the benefit of the guarantee? The default position prevents this without prior written consent.
What other names does Deed of Guarantee go by?
- Guarantee Agreement
- Security Agreement
- Deed of Financial Guarantee
- Deed of Guarantee & Indemnity of Loan
- Financial Guarantor Agreement
- Deed of Cross-Guarantee
Frequently Asked Questions
- Guarantors – the parties who will be guaranteeing the underlying obligations;
- Benefiting Parties – the parties in whose favour the Guarantors will be giving this guarantee; and
- Principal Obligors – the parties who owe the underlying obligations that are being guaranteed under this guarantee
You can name up to 5 of each, and they will hold their rights and owe their obligations jointly and severally.
You’ll need this document when you are borrowing or lending money, and you want to offer a guarantee in support that debt arrangement.
A named guarantor will be someone who can shoulder the borrower’s obligations and be an alternative recourse if the borrower defaults.
You will need the following information:
- Parties — particulars of the guarantors and obligors, including names, addresses, ACN for companies, and ABN where applicable.
- Details of up to 5 agreements being guaranteed.
- Interest conditions (if applicable)
A lender will have their own requirements for guarantors but generally, guarantors:
- have equity in their property;
- a stable income;
- are an Australian citizen or permanent resident; and
- are between 18-65 years old.
A guarantee will provide added protection for a lender, particularly when the borrower does not have sufficiently strong credentials. Each guarantor provides the borrower with an alternative party to recover debts owed to the lender.
Ideally, a guarantor will have sufficient personal assets to be worth pursuing a debt-recovery action against when required.
If the borrower defaults, the guarantor becomes personally liable regardless of whether the borrower is capable of repaying.
The guarantor’s liabilities are not relinquished until the debt is repaid and all of the borrower’s obligations are fully satisfied. A director guarantor’s obligations are not relinquished by his or her resignation.
As an alternative, parties may wish to negotiate a larger security amount in place of a guarantee.
Yes. In fact, guarantors and borrowers should apply for the removal of a guarantee as soon as any of the following are possible:
- The borrower can repay the debts without any assistance;
- The borrower has repaid 80% of the loan value; or
- The borrower has not missed any payments in the last 6 months.
There are several signing options available. How you sign largely depends on where the parties are located and if they will attend signing together. You can print on paper and sign, or use electronic signature tools such as Docusign or Hellosign.
If you need any assistance please contact us directly, we would be happy to assist.
If you have any questions or are uncertain about any aspect of the document please do not sign it or use it, please contact us directly and we would be happy to assist.
Absolutely! Get in touch with us and we can provide a fixed-fee price to review it.
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