Information for the Co-Signer
If a property manager is uncertain about approving a Lease Agreement due to factors such as insufficient credit history or poor credit, they may ask the applicant if they have a co-signer. A co-signer can provide additional assurance of lease fulfillment.
Finding a co-signer:
In many cases, a co-signer may be a family member, such as a parent, or someone who knows the applicant well. The co-signer must have a good credit history, as individuals with poor credit will not be suitable. By co-signing, the co-signer agrees to take on the same responsibilities as the tenant, ensuring the lease agreement is fulfilled. This means that if the tenant defaults on the lease, the landlord or property manager will seek payment from the co-signer. It is crucial that this responsibility is clearly explained to the co-signer before they sign the lease agreement.
Effects of being a co-signer:
The responsibilities of being a co-signer can have significant implications. If the tenant fails to make payments, the co-signer will be required to do so. Additionally, the account may be reported on both the tenant’s and the co-signer’s credit reports, potentially lowering the co-signer’s credit score and affecting their ability to borrow in the future.
Some consequences of being a co-signer:
- You are responsible for the agreement if the tenant does not make the rent payments.
- You don’t get anything out of the agreement, just risk.
- It could affect your friendship or relationship.
- May affect your credit.
- You need to track the monthly payments to insure they are being paid.
Not that co-signing a Lease Agreement for someone is a bad thing, you just need to be aware of all the facts.
Information for the Guarantor
Being a guarantor on a lease agreement is similar to being a co-signer. If the tenant fails to make the agreed payments, the landlord or property manager will seek those payments from the guarantor. This is a traditional guarantor agreement. A guarantor may be required for reasons such as the tenant having weak, poor, or no credit.
One major difference with a guarantor agreement is that if a rent payment is missed or the rent goes into default, the landlord or property manager will seek payment directly from the guarantor, with the original tenant having limited involvement.
Effects of being a guarantor:
- You are responsible for the agreement if the tenant does not make the payments.
- It could affect your friendship or relationship.
- May affect only your credit.
- You need to track the monthly payments to insure they are being paid.
Prior to co-signing or guaranteeing an agreement, you need to look at all the options.
Questions to Ask Prior to Co-Signing or Guaranteeing
Why is the landlord requiring this:
Does the borrower have poor credit, or no credit.
Am I prepared and able to make the payments:
In some instances a guarantor needs to be a property owner, you could be placing your property at risk.
Can you afford to pay the payments if the tenant does not.
How well do you know the Applicant:
The person asking you to co-sign or guarantee the agreement, are they family, a close friend.
Do you feel they will make the payments?
Are there alternatives:
What is the agreement for? Rental Lease Agreement.
Can they save the money first and move at a later month?