Perhaps it is your kid sister, or best friend, or cousin asking. Before you respond to their request, know exactly what it means to be a co-signer on an apartment lease. Yes, we are eager to help friends and family members in need but there are financial and legal implications of being the co-signer on an apartment lease that you should be aware of.
What Does a Co-Signer Do Exactly?
A co-signer is a third-party individual who assumes responsibility of the lease if the primary lessee is unable to do so. What this means is, you will be responsible for ensuring that the rent on the apartment is paid. You will also be responsible for fees towards any other damages (beyond normal wear and tear) that occur in the apartment. If your friend or sibling is unable to pay, then it falls upon you to do so.
If a potential renter has low income, zero rental history, or bad credit, the landlord might require for them to have a co-signer on the apartment lease. As a co-signer, you don’t have to live in the apartment but your name will be on the lease.
In the Case of Unpaid Rent
Should your friend or family member not pay the rent for whatever reason, you’re next in line, if you are the co-signer. This means you’ll have to get the money to the landlord ASAP. If you are unable to pay the rent, you’ll be at default. This means that credit agencies will be notified and your credit score may take a hit—not good if you’re looking to get a loan or rent your own place.
Defaulting on paying the rent could also result in a court date. If the landlord decides to send you to collections, you’ll have to come up with the money one way or another, as prescribed by law. Overall, not paying is an undesirable situation.
Things to Consider Before Co-Signing
Co-signers assume equal responsibility of an apartment lease when they sign on. This means you’ll be responsible for any payments your friend or family member fails to make. The consequences of failing your responsibility are burdensome, so think carefully before agreeing. Here are important points to consider.
Personal History: If your friend has a history of not paying back others, getting fired from jobs, or making poor life choices, co-signing for them is likely a huge risk. Factor in this person’s history and various life choices before moving on to other considerations.
Job Situation: Does your friend have a stable job? Can they afford the apartment on basis of their current salary? Do they have other sources of income? If the answer is no, avoid co-signing. Job security is an important factor as well. Co-signing the apartment lease and then finding out that your friend lost their job would be a really bad situation. Ask your friend about their work life before you make a decision.
Your Financial Burdens: Take a few moments to think about your part of the bargain. Are you comfortable paying the rent (plus additional fees, if any), in case your friend is not able to do so? Or would it be a huge financial burden for you? Do you have enough saved money to uphold your role as a co-signer? If not, you may be better off not co-signing.
Know Yourself: Becoming a co-signer could introduce a bit of extra stress in your life. If you think that you’ll be constantly stressing out about your friend and if they will be able to make their monthly rent payments, reconsider becoming a co-signer.
How’s Your Relationship?: By becoming a co-signer, you may put yourself in an awkward position. If your friend is unable to pay, you have to come in and save the day. Covering rent may not be easy for you, and this could lead to a feeling of bitterness and resentment towards your friend. If you feel that your relationship would be burdened due to possible financial struggle, say no to co-signing and protect the friendship.
Don’t become a co-signer from a sense of obligation and/or guilt, even if you have a close relationship with this person. If you feel that they may have difficulty making rent payments, or that you will be unduly stressed on account of co-signing, or that your relationship could potentially be strained, be firm and polite in saying “No” to becoming a co-signer.
Now, if you have complete confidence in your friend and their ability to make monthly rent payments, and you are comfortable with the idea of stepping in to help them, if needed, then go right ahead and become a co-signer on their apartment lease. You will be able to help your friend get an apartment as well as build credit history, both at the same time.