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ARTICLE · 12 OCTOBER 2009

Liability Under A Personal Guarantee

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The most important thing to realise about guarantees is that when it comes to payment, the liability of the guarantor will include the unpaid principal and the interest which continues to accrue at a compound rate of interest.

IrelandFinance and Banking
Jill Callanan
Jill Callanan

As featured in The Sunday Business Post, 28 June 2009

The most important thing to realise about guarantees is that when it comes to payment, the liability of the guarantor will include the unpaid principal and the interest which continues to accrue at a compound rate of interest.

Compounding of interest means that interest is added to principal annually and interest continues to accrue on the sum of both. Over time, the result of compounding of interest means that the amount of interest owing may well exceed by several times the original amount of the loan.

The longer the loan remains unpaid, the greater the effect of compounding and the greater the liability of the guarantor, which continues to grow at a compound rate until discharged.

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