Navigating the rental market can be tricky, more so if your credit history needs a bit of work and you’ve been declined for an apartment or you are scared of being declined and loosing out on that hard earned money with the excessive app/admin fees a lot of communities are charging these days.
Enter cosigners and guarantors—two potential keys to unlocking doors that otherwise might remain closed. They both serve to strengthen your application by promising property managers that rent will be paid, offering assurance if your financial credentials don’t quite cut it. But what’s the difference, which one should you choose and will they even take one?
In simple terms, a cosigner is like a financial partner from the get-go, equally responsible for the rent. On the flip side, a guarantor steps in only if you falter. Understanding these roles helps you weigh your options effectively. We’ll explore the pros and cons, helping you decide what’s best for your situation. Whether you’re a young renter just starting your credit journey or someone seeking that extra help from a friend, loved one or rich uncle – lets explore the differences together.
Understanding Cosigners and Guarantors
We all know that renting an apartment isn’t always easy, especially if you have a limited credit history! Nevermind the crazy underwriting criteria that requires applicants to have a 600 credit score and no background issues with many of the professional property mangement companies we have in Austin. That’s where cosigners and guarantors come into play for landlords, property managers and apartment communities here in Austin. Your co-signer can help you secure a rental by vouching for your financial reliability so to speak and adding themselves to the lease during the application process. But what exactly does a cosinger do compared to a guarantor, and how are they different? Let’s break it down for ya’ll.
What is a Cosigner?
A cosigner is like a financial co-applicant. They’re someone who signs the lease with you and promises to pay the rent if you can’t. This means they share the same responsibilities for the lease as you do. Here’s what you need to know:
- Full Liability: A cosigner is as responsible for the lease as you are from the get-go. If you miss a payment, the landlord can ask your cosigner to cover it without any delay.
- Credit Impact: This is serious business! If you or your cosigner miss payments, it can hurt both of your credit scores. Late payments might leave a mark that doesn’t easily fade.
- Equal Rights: Depending on the agreement, a cosigner could have similar rights as a tenant. They might even be allowed to live in the property or access it.
In essence, a cosigner is a partner in your rental agreement and they are often required to make 3x the monthly rent. They’re like having a safety net that is right there with you, ready and willing to help you out. That being said though that help can sometimes turn into a curse as I’ve personally seen scenarios where someone co-signed on a lease then the lease holder broke it and the property debt for not paying the amounts for the remainder of the contract eventually went to collections and showed up on the co-signers credit – preventing him from qualifying for most apartments! Property debt is a big, bad red flag for 99.9% of all rentals.
What is a Guarantor?
Think of a guarantor as a silent supporter. They don’t share the lease responsibilities from day one like a cosigner, but they do promise to step in if things go south. Here’s how a guarantor works:
- Conditional Liability: A guarantor only becomes liable if you don’t pay your rent. Until then, they’re just hanging out in the background.
- Credit Shield: Their credit is protected as long as you keep up with rent payments. If you default, though, the impacts can ripple over to them.
- No Tenant Rights: Unlike cosigners, guarantors usually don’t have the right to live in or access the property. They are purely financial backers.
Guarantors stand in the wings, only stepping into the spotlight when absolutely necessary. They’re the backstage crew to your starring role on the rental stage but ultimately responsible if things go South.
Understanding the differences between cosigners and guarantors can help you make the best choice for your rental needs – especially since co-signers need to make 3x the rent and guarantors often need to make 5x the rental amount.
Pros of Having a Cosigner
Navigating the rental market can sometimes feel like swimming in a pool full of sharks. That’s where a cosigner can be your trusty lifeline. Let’s explore the perks of having a cosigner in your corner.
Stronger Rental Application
Ever felt like your rental application is missing that extra oomph? A cosigner can be the secret ingredient you need to get approved for a place that requires 3x the montly rent. If you don’t want a co-signor just ask your apartment locator for communities that only require 2 or 2x the monthly rent or even better – a community that will approve your application even if you don’t meet the income requirement!
Think of a co-signer like a letter of recommendation for college. With someone backing you up financially, landlords are more likely to pick you over someone else who can’t afford the unit or meet the background check requirements. It’s like having an extra layer of trust but one that is contractually obligated to perform! If you’re a first-time renter or rebuilding your credit, this could be your golden ticket to landing that dream apartment downtown if you want something fancy. On the other hand, we have access to many communities that will work with low credit all around Austin.
Shared Financial Responsibility
Financial stress can feel like a heavy backpack weighing you down even since inflation roared its head a few years ago. A cosigner helps lighten that load if you need to depend on them when/if you can’t afford to pay rent by the 1st of the month. When you share the financial responsibility, it can ease your burden and remove some stress you might be feeling. Renter beware however – don’t take this relationship with your co-signer lightly as they probably don’t want to step in financially unless absolutely necessary. This means that if you’re short on rent one month, the cosigner can step in and help – especially if you’re on good terms.
Immediate Liability Coverage
What gives landlords peace of mind? Knowing there’s immediate backup if the tenant can’t cough up the rent if you are avoiding the property manager and not answering your door or phone. From Day One when you sign a lease, a cosigner is accountable, providing that reassurance landlords crave from their tenants. It’s like having a trusted friend who vouches for you right from the start – but contractually obligated. This assurance itself can make landlords more willing to hand over those keys.
Cons of Having a Cosigner
Having a cosigner can seem like a safety net, but it’s not always smooth sailing as we briefly mentioned above. There are risks involved, and it’s important to weigh these carefully. The person cosigning is putting their finances and credit on the line. Let’s explore how this can impact them before you decide to ask them for help and put their name on a rental application.
Impact on Cosigner’s Credit
When a cosigner steps in, they tie their credit to the tenant’s financial habits. This responsibility could be pretty hefty; especially if they loose their job or we run into a recession and they can’t afford to step up to the plate and pay your late/missing rent payments. If the tenant misses a payment, the cosigner’s credit score can drop faster than the titanic hitting an iceberg.
- Shared Liability: The cosigner shares the financial responsibility. If the rent isn’t paid, it’s their credit that takes the hit, turning a mistake they didn’t make into their problem.
- Potential for Debt: Even one missed payment can begin a downward spiral, appearing as a red flag to future lenders that might not approve them for a future home loan or even another apartment!
This isn’t just a minor inconvenience; it’s a tangible risk the co-signer needs to understand. One late payment or default can affect their ability to secure loans, credit cards, or even buy a car.
Risk of Eviction for Cosigner
Though not living in the rented space, cosigners are not free from the shadow of eviction. How does this happen? Well, they’re essentially an invisible tenant with all the risk and none of the comforts of living with that big gym and heated pool in that new unit in the apartment building you really wanted to move into.
- Legal Responsibilities: If the tenant fails to pay, the cosigner might find themselves facing eviction proceedings, a process that legally binds them to rectify the situation and once that goes on their record they are going to be a rock in a hard place should they want to rent another place again within 7 years.
- Emotional Stress: Beyond financial strain, this can cause significant stress on your relationship – especially if they are loved one, family member or friend. They are pulled into legal battles and potentially forced to cover rent or move out belongings, even if they never set foot in the apartment. Can you imagine how they might feel if this were to happen?
It’s vital to understand that agreeing to be a cosigner is not merely a character reference for a friend or family member. It’s a legal commitment that can leave a lasting impression on one’s financial health.
Find an Apartment in Austin that Accepts Co-Signers
Choosing between a cosigner and a guarantor can significantly impact your rental journey and while cosigners share responsibility right from the start, which might streamline the process, it can complicate personal relationships if payment issues arise. On the other hand, guarantors step in only if there’s a lapse in rent, providing a safety net while potentially minimizing direct involvement which will we explore in the next blog post.
Regardless of where you might be in your apartment search…if you are certain you need an apartment in Austin that accepts co-signers let us know. We strive to find the best specials avaialable to all clients who have unique situations and requier the assistance of an apartment expert!
