Bud is unable to obtain a loan without some form of additional reassurances. Bud comes to you for assistance. You are willing to help Bud, but you wish to protect yourself from liability as much as possible. Would you prefer a surety or a guaranty? The

Question

bank issuing the loan also wishes to protect itself as much as possible. Would the bank prefer a surety or guaranty? If your oral assurances are enough to solidify the loan, has a surety or guaranty been formed?

Answer 1

Under either a surety or a guaranty, you are being asked to promise to answer for Bud's debt. It would be to your advantage to create a guaranty situation, for this would make you secondarily liable, rather than being primarily liable under a suretyship. You then could be assured that all efforts would be made to collect from Bud before an attempt to collect from you. The bank probably would prefer to have you create a surety, because this would allow them to come directly to you for payment and therefore save them time and money in collection costs. Because most states require that guaranties be written to be enforceable, it appears that a surety is being sought through oral assurances.