Personal guarantees and security: what you're really signing

When two offers have similar costs, the deciding difference is often what each asks you to put on the line. A loan that’s slightly cheaper but secured on your home, with a broad security agreement over the business and guarantees from both partners, is a very different proposition from one that relies on a single director’s guarantee. This page compares the main forms of security and what they mean for you.

What forms of security might a loan include?

Form	What it gives the lender	What’s at risk	Where it’s recorded
Personal guarantee	A right to pursue the guarantor for the debt	Guarantor’s personal assets	In the loan documents
General security agreement (GSA)	Rights over some or all business assets	Stock, equipment, receivables, more	PPSR
Specific security interest	Rights over one asset	That asset, such as a vehicle	PPSR
First or second mortgage	Rights over a property	The property	Land title
Caveat	A claim noted on the title	The property	Land title

Many loans combine several. An “unsecured” loan with a personal guarantee and an all-assets GSA still carries real risk.

How do offers differ on security?

When comparing, set out for each offer:

1. Who signs. Which directors, owners or family members guarantee?
2. What’s charged. Specific asset, all business assets, or property?
3. Any limits. Is the guarantee capped? Does it cover only this loan or all future debts?
4. What triggers enforcement. What counts as default?
5. How security is released. When the loan is repaid, what’s needed to discharge it?

	Offer A	Offer B
Guarantees	Both directors, unlimited	One director, capped
Business assets	All present and after-acquired property	Specific vehicle only
Property	None	None
Release on repayment	Discharge needed	Automatic on final payment

Offer B is clearly lighter, which may justify a slightly higher cost.

What are the warning signs?

• “All monies” guarantees that cover any debt you ever owe the lender, not just this loan.
• Broad GSAs that could make future borrowing harder, because other lenders see the existing registration.
• Family members asked to guarantee without independent advice.
• Security that’s out of proportion to the loan.
• Unclear default triggers.

Should you get advice?

Guarantors in particular should get independent legal advice before signing. Many lenders require a certificate of independent advice for third-party guarantors. If a dispute arises later with a commercial lender, ASIC’s guidance explains where to complain.

Illustrative example. A Toowong design studio is offered two $70,000 loans. The cheaper one needs guarantees from both directors and an all-assets GSA. The other needs one director’s guarantee and no GSA. The studio expects to seek equipment finance next year and doesn’t want a broad GSA showing on the PPSR that could complicate it. They take the second offer, accepting a small extra cost for a cleaner security position.

How does security connect to cost?

More security usually brings lower pricing and larger amounts, but adds fees and risk. Our compare by security page sets out the trade-offs, and the fees page lists the costs that come with each type.

What happens to security when the loan ends?

Security doesn’t always disappear automatically when the last repayment is made. Depending on the type:

• Mortgages need a discharge lodged with the land titles office, usually with a discharge fee.
• Caveats need to be withdrawn.
• PPSR registrations should be removed by the secured party once the debt is repaid.
• Guarantees may continue if they’re “all monies” guarantees covering other debts to the same lender.

Security	How to make sure it’s released
Mortgage	Request a discharge when you request the payout figure
Caveat	Confirm in writing when it will be withdrawn
PPSR registration	Search the PPSR after payout to check it’s gone
Guarantee	Ask for written confirmation that it’s released

Old registrations can cause problems years later when you apply for new finance or sell assets. A quick PPSR search after a loan is repaid confirms it’s been cleared.

Can you reduce the security later?

Sometimes. As a loan is paid down or the business grows, it may be possible to release a guarantor, remove a property from security or replace a broad GSA with a narrower one. Lenders don’t do this automatically; you have to ask, and a variation fee may apply. It’s worth raising when you’re refinancing or when a family member who guaranteed the original loan wants to step back.

See what each option asks of you

We set out what each option needs you to sign alongside its cost. Enquiring doesn’t put a mark on your credit file; a check only comes up once you decide to proceed. We don’t scatter your details across lenders. A real person explains the guarantees and security each option involves, in plain English, before you commit.

Please be accurate on the form about directors, owners and any property. Start your enquiry, or rank loan types by how much security they need using the comparison tool and then check your options.