Surety

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DEFINITION of 'Surety'

The guarantee of the debts of one party by another. A surety is the organization or person that assumes the responsibility of paying the debt in case the debtor policy defaults or is unable to make the payments. The party that guarantees the debt is referred to as the surety, or as the guarantor.

BREAKING DOWN 'Surety'

Surety is most common in contracts in which one party questions whether the counter party in the contract will be able to fulfill all requirements. The party may require the counter party to come forward with a guarantor in order to reduce risk, with the guarantor entering into a contract of suretyship. This is intended to lower risk to the debtor (or lender), which might lower interest for the borrower. It can be in the form of a "surety bond."

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