Does giving a personal guarantee lower my rate?

2 min read

Can cut the rateLess lender risk

Personal assets at stakeThe trade-off

Weigh saving vs riskQuantify both

Alternatives existGuarantee-free options

Why a guarantee can lower the rate

A personal guarantee lets the lender pursue the director's own assets if the company cannot repay, cutting through limited liability. That reduces the lender's potential loss on a default, and lower risk means a lower margin — so offering a guarantee can shave the rate, sometimes materially. It is the same mechanism as any security lowering price.

What you're putting at stake

The rate saving is not free. A guarantee means your personal assets — potentially your home, depending on its terms — can be pursued for the company's debt, and that survives the company's limited liability. On default it can be called. This is a serious, personal commitment, and the modest rate saving has to be weighed against a potentially large personal exposure.

Making the call

Quantify both sides. What does the guarantee save you in total repayable over the term? And what, realistically, is the exposure if things go wrong? For a confident, established, cash-generative business the saving may be a reasonable trade; for a newer or more volatile one, the certainty of protecting personal assets may be worth paying more for. There are also guarantee-free options — see the guide. Take advice before signing a guarantee.

Compare a guaranteed and guarantee-free quote on total cost, then apply.

Frequently asked questions

How much does a personal guarantee reduce the rate?

It varies with your profile and the lender, but a guarantee can meaningfully lower the margin because it reduces the lender's risk. The stronger your business already looks, the smaller the additional saving a guarantee brings; a weaker profile may see a larger reduction. Ask each lender to quote both with and without a guarantee, and compare the total repayable to see exactly what the guarantee is worth.

Is giving a personal guarantee worth the risk?

It depends on the size of the saving against the scale of the exposure and your confidence in repayment. For an established, cash-generative business with a clear plan, a guarantee for a lower rate can be reasonable. For a newer or more volatile one, protecting personal assets may be worth paying more. Quantify the total saving and the realistic downside, and take advice before signing.