I have posted before about the dangers of this, and it is an issue that deserves clarity and another review:
Your lender may require you to obtain Independent Legal Advice, and while at first this may appear onerous, it is crucial for you, both to understand fully the transaction you are entering, and to avoid liability and the loss of your assets which you are using to guarantee. For one, you may be liable for more than the amount of the guarantee, including lender enforcement costs if a default occurs, and this may not be clear in your interactions with the lender.
A lender may say ‘just sign this with a lawyer- it is 5-minutes’. That is not the case. The signature of a lawyer, and the advice they give, can save your assets and remove your responsibility if a default occurs. It is money well spent, even if your lender does not request you receive Legal Advice.
If you are lending money directly to someone, often your children, it is also crucial to have drawn up a loan document covers all the things that an arm’s length agreement would cover. If a child passes, or more commonly enters or leaves a relationship, you may have no recourse to recover the loan.
Contact a lawyer for assistance.
