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The promissory note is the
document that the borrower signs promising to pay back the loan. The promissory note should contain all of the terms
of the loan including the amount borrowed, the payment terms, the interest rate, penalties and the lenders rights if there
is a default. |
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A mortgage is a security document used to give the lender a security interest
in real property. The mortgage is not the document where the borrower promises to pay the debt, in the mortgagethe owner
of the property agrees to allow his/her property to be used as collateral to secure the promissory note. If there
is a default on the promissory note, the lender is then entitled to foreclose the mortgage and become the owner of the
property if the default is not cured before the Sheriff's Sale or the amount bid at the Sheriff's Sale is not paid off
before the end of the owners Promissory Note, Mortgage & Personal Guarantees. |
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A personal guarantee is given by an individual
to a lender promising to pay the loan of another if there is a default. To obtain a business loan it is commonly
required that the owner of the business guarantee the repayment of the loan. If there is a default in the guaranteed
loan, the lender generally would have the right to seek payment by the guarantor even if the lender did not exhaust
all methods of collecting from the borrower. If the guarantor pays the lender pursuant to the guarantee the guarantor
generally would have the right to seek damages from the borrower. Personal guarantees are very important in a falling economy. - First, there are more defaults.ec
- Second, when there are defaults and the value of the collateral sinks below the amount
owed lenders are going to look to collect on the guarantee.
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