In addition to the guarantor, the agreement includes a security interest, which involves collateral provided by the borrower. This collateral can be personal property, such as a vehicle or valuable collectibles, which the lender can seize and sell if the borrower fails to repay the loan. The inclusion of both a guarantor and collateral significantly reduces the lender’s risk, ensuring they have multiple avenues to recover the loan amount.
The agreement also details the rights and obligations of each party, including the lender’s right to take possession of the collateral and the guarantor’s legal responsibility to cover the debt. This dual protection mechanism makes such agreements particularly attractive to lenders, as it enhances the likelihood of loan recovery.
