Surety

What is 'Surety'

Surety is 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."

RELATED TERMS
  1. Construction Bond

    A type of surety bond used by investors in construction projects ...
  2. Maintenance Bond

    A type of surety bond purchased by a contractor that protects ...
  3. Bail Bond

    A written promise signed by a defendant and surety to ensure ...
  4. Contingent Guarantee

    A guarantee of payment made by a third party, known as the guarantor, ...
  5. Warehouse Bond

    A type of financial protection that assures an individual or ...
  6. Third Party Beneficiary

    A person who will benefit from a contract made between two other ...
Related Articles
  1. Markets

    What's a Debtor?

    A debtor​ is an individual or company that owes money.
  2. Investing

    Understanding Bad Debt

    Bad debt is money a company or lender is owed, but is unable to collect.
  3. Entrepreneurship & Small Business

    Master The Art Of Negotiation

    Learn the strategies that will help you to come out on top in any negotiation.
  4. Personal Finance

    Understanding Default Risk

    Default risk is the chance that companies or individuals will be unable to pay their debts.
  5. Investing

    Debt Settlement Arrangements And Your Credit Score

    The debt settlement process is not for everyone and can further damage your credit score. However, it can prevent the debt from being sold to a collection agency, who may only accept payment ...
  6. Managing Wealth

    Explaining Counterparty Risk

    Counterparty risk is the risk that the other party in an agreement will default, or fail to live up to its contractual obligation.
  7. Markets

    What's a Bank Guarantee?

    Bank guarantees are used to assure a third party of payment or performance of an obligation. The obligation can be either to pay an amount due or to perform on a contract. By granting the guarantee, ...
  8. Personal Finance

    Best 5 Money-Saving Tips to Get out of Debt

    Understand the different types of debt and the reasons why people get into debt. Learn about five tips to follow to get out of debt.
  9. Investing

    What Happens in a Default?

    Borrowers are in default when they don’t honor a debt, whether their failure is intentional or not.
  10. Financial Advisor

    The 4 Best Debt Reduction Services

    It can be tricky to find the best debt reduction services for your financial situation. These top 4 debt consolidation firms help make the process easier.
RELATED FAQS
  1. Under the Uniform Securities Act, a broker-dealer is generally required to obtain ...

    The correct answer is c. The correct answer is $10,000. While the Act states that the Administrator may set the amount, the ... Read Answer >>
  2. Under the USA, registration as an IAR includes all of the following EXCEPT:

    Under the USA, registration as an IAR includes all of the following EXCEPT: A. Minimum net capitalB. Passing a qualification ... Read Answer >>
  3. How are my cosigners affected if I file bankruptcy?

    Learn how cosigners and guarantors are affected by bankruptcy filings and how cosigner treatment changes based on the type ... Read Answer >>
  4. What is a good debt ratio, and what is a bad debt ratio?

  5. How are arm's-length transactions determined by law?

    Determine if transactions are conducted at arm's length by checking if the parties to a contract are independent and transact ... Read Answer >>
  6. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center