Guarantee

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Also called a “guaranty, guarantee is a promise to a person (such as a creditor) from a guarantor or surety. It also used to refer to the actual promise made – usually an assurance of accountability for the future debt, default, or miscarriage of a principal debtor

The Creditor, Debtor, and Guarantor

Whenever a guarantor makes a guarantee of payment to a creditor, the creditor becomes a guarantee. The principal debtor (the party in debt to the creditor) is held primarily responsible for payment. The guarantor acts as a fallback – in case the debtor fails to pay.

Guarantees Today

Guarantees are commonly used in consumer warranties and other transactions to assure customers of quality/performance.

“Guarantee” is more commonly used than “guaranty”. “Guaranty” is rarely seen outside of legal writing.

Related terms:

Bankruptcy Code

Guarantor

Guaranty

Principal

Surety

Surety bond

Warranty

[Last updated in July of 2020 by the Wex Definitions Team]