Personal security
A personal security is a guarantee mechanism by which a person — the guarantor — pledges their own assets to cover a borrower's debt to a lender. It does not rest on a specific asset but on the guarantor's overall financial capacity, and may take the form of a surety bond or an autonomous guarantee.
Key points
- Personal security is the counterpart of real security: it bears on a person's assets, not on a specific asset.
- Simple surety and joint and several surety are the two most common forms in mortgage lending.
- An autonomous guarantee (first-demand guarantee) is less common in residential financing but widespread in business loans.
- Where multiple guarantors exist, each may be held liable for the full debt depending on the contract terms.
- Personal security ends when the primary obligation it backs is extinguished.
Frequently asked questions
How does a lender verify that a personal security is adequate?
When the guarantor is a natural person (e.g., a parent acting as guarantor), the bank analyzes their income, expenses, assets, and existing liabilities to verify that their financial capacity is proportionate to the guaranteed debt. The law also requires a handwritten statement from the guarantor acknowledging the scope of their commitment, to ensure informed consent.
Why distinguish personal security from real security in a mortgage application?
The two types of security differ in cost, formalities, and level of protection for the lender. Personal security (surety) is generally quicker and cheaper to set up but exposes the lender to the guarantor's insolvency risk. Real security (mortgage) is more expensive to establish but provides a direct recourse against the financed property, regardless of the borrower's or guarantor's financial situation.
What happens if the guarantor dies before the loan is fully repaid?
The surety's death does not automatically extinguish the guarantee: absent a contrary clause, the obligation passes to the heirs up to the value of the inherited estate. The heirs may, however, renounce the succession to avoid the liability, or negotiate with the lender to substitute another form of security. Parties are therefore advised to address this scenario in the surety agreement.
In practice
A 28-year-old first-time buyer on a permanent contract for one year has a solid application but falls short of Crédit Logement's criteria due to a limited down payment. Her father, who owns his property outright, provides a personal joint and several surety. The bank approves the financing based on the combined financial standing and formalizes the father's commitment through a private written deed including the legally required handwritten statement.
Official sources
- Article 2287-1 of the Civil Code (personal securities) · Légifrance
- Mortgage credit (official guide) · Service-Public.gouv.fr
- Housing and financing information · ANIL