Guarantee Letter Format with Example

Guarantee letters can be used in a variety of areas. However, they are most commonly used in financial settings. This letter generally shows that the customer is committing with the financial institute i.e., the bank to pay off the loan in time. People also need a guarantee letter when products are purchased. This letter is also used when guardians of the child have to guarantee that they will bear all the educational expenses of the child.

Importance of the letter of guarantee:

When it comes to lending money or something valuable to someone, we all feel insecure as we fear that the other person might not pay us back. Despite the insecurity, the processes of lending and borrowing can never be stopped in a business world. Trust in the business world is developed with the help of different tools. The letter of guarantee is one of those tools.

The guarantor in this letter assures that the person borrowing the money will return it by the date that has been specified by the lender. The guarantor also tells that how the lender will be able to retrieve the money in case the borrower does not return it.

When to write a guarantee letter?

Different situations and scenarios entail the use of guarantee letters. Let us talk about some of the common situations in which these letters can be written:

  1. When someone lends the money from the bank and the bank needs a surety that the borrower will return the money in time, the letter of guarantee is submitted to the bank by the borrower. In this letter, the borrower gives assurance that he will make the payment by the deadline set by the bank.
  2. When a person purchases some products from a manufacturer or seller on credit, he/has to give assurance that the full payment of the products purchased will be made along with the interest if it is applied. For his purpose, the letter of assurance is considered to be very important.
  3. Some educational institutes also need a warrantee from the parents of the child about payment of the fee just to get away with the insecurity especially when the child has moved to a different city or the country for getting an education. Similarly, when a student gets a student loan for studies from his college or university, the guarantee of parents is required.  
  4. When someone purchases products from a seller in installments, the warrantee letter assures that all the installments will be made in time without any delay.

Format of the guarantee letter:

If you have been tasked to write this letter, you are required to keep the format of the letter on board. Below are some tips to follow for easily structuring the letter in the right format.

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  1. You should keep the purpose of the letter in mind so that you know which information must be included in the letter.
  2. Mention the total amount that has been borrowed by the borrower and the purpose of borrowing. However, the letter is not always written to secure the borrowed money. Whatever the purpose of the letter is, keep that in mind and then write.
  3. Mention the account number of the person to which the lender has transferred the borrowed money. This account number is written for confirmation of the account.
  4. Mention the date by which the borrower will pay back the money.
  5. State what will happen if the borrowed money is not returned by the deadline.

To help you write the letter in the correct format, here is a sample letter.  

Sample guarantee letter:

Date:

To whom it may concern,

This guarantee letter is being written to hereby certify that I, the wife of Mr. Jackson will support my niece to help her meet her education expenses. I guarantee that I will pay her the monthly amount of 1000$ as long as she is studying at ABC university. I vow that I will be responsible for all her educational expenses and the school’s administration can contact me in case any emergency occurs.

Regards,

Name of the sender

Signatures of the sender


File: Word (.docx) 2007+ and iPad
Size 18 Kb

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