[citation needed] Generally, their parents will provide a guarantee to the lender to cover any shortfall in the event of default.
[citation needed] There are three main types [1] An unsecured personal loan that is popular with borrowers who have a poor credit rating.
They also require the guarantor to meet the borrower’s obligations if they default on their loan repayments.
The term can be used to refer to a government promising to take on a private debt obligation if the borrower defaults.
[2] Loan guarantees can also be extended to large borrowers for national security reasons, to help companies in essential industries, or in situations where the failure of a large company will harm the larger economy, For example, Chrysler Corporation, one of the "big three" US automobile manufacturers, obtained a loan guarantee in 1979 amid its near collapse and lobbying by labor interests.