A guarantee is a guarantee of compliance with an obligation.

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A guarantee is understood as a guarantee of compliance with an obligation, so that in the case that the commitment cannot be met, someone responds (usually jointly and severally) on behalf of the debtor, to a third party.

The type of obligations contemplated in these cases are usually monetary, as they are the ones that have legal regulation, but there are other options.

Types of guarantees

According to the obligation that is guaranteed:

• Economic guarantee: monetary obligations or deliveries of goods in consideration.

• Technical guarantee: obligation to execute work or provide services in the previously agreed terms.

Types of guarantees depending on who issues the guarantee (issuer):

• Personal guarantee: is the one issued by a natural/legal person, which commits to payment of the debt in case of default by the main debtor.

Finally, personal guarantees are offered as additional guarantee to the debtor’s patrimonial guarantee.

• Bank guarantee: is the one issued by a financial entity, which commits to payment of the debt in case of default.

What agents intervene?

In this type of operation the following agents intervene:

• The guarantor: is the person or entity willing to meet the commitments of the guaranteed party.

• The guaranteed party: is the person or entity that has committed to the guarantee beneficiary.

• The guarantee beneficiary: is the other party in the relationship, who will receive what was agreed, either through the guaranteed party or the guarantor, in case of inability to comply.

How does it work?

It will depend on the type of guarantee, as bank guarantees, for example, need to meet many more requirements than a personal guarantee in general. A bank guarantee will ask you for stricter requirements (insurance policies…) depending on the economic capacity you show after conducting a previous study.

Broadly speaking, these types of operations must always be carried out through written contract and in many cases must be elevated to public deed (bank guarantees, always).

Most common uses

Personal guarantees are very common in consumer credit and business financing. As a general rule, these guarantees are “free”, that is, the guarantor receives no consideration from the guaranteed party for granting the guarantee.

Bank guarantees are mainly used to guarantee a loan, to guarantee companies against third parties and lately, increasingly frequently, they are used in real estate leases, to ensure payment capacity.

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We hope this information is very useful to you.