Perhaps it’s your kid sister, or best friend or cousin asking if you’ll co-sign on their lease. Yes, we’re 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.
Before you respond to their request, you need to be informed and fully understand being a co-signer for an apartment means.
What does co-sign mean?
Co-signing a lease means that a third-party individual — like a parent, sibling or friend — assumes the responsibility of the lease if the primary lessee is unable to do so. As a co-signer, this means that you’ll be responsible for ensuring that the rent is paid and fulfilled.
You’ll 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 you agree to be a co-signer for an apartment, you need to ensure you’re able and willing to pay the rent and fees in addition to your own life expenses should the person you’re co-signing for become unable to pay for their rent.
If a potential renter has a low income, zero rental history or bad credit, the landlord might require 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 and you’ll be legally obligated to follow the terms of the lease.
What is the difference between a guarantor and a co-signer?
You may have heard the terms co-signer and guarantor and yes, they’re similar. Co-signers and guarantors are both a third-party person that assumes responsibility for the lease of the lessee is unable to pay rent and fees associated with the rental property. Both are legally obligated to pay the rent and fulfill the terms of the lease. And both a co-signer and a guarantor can help a potential renter obtain a lease if they’re unable to qualify on their own.
However, a co-signer has more legal rights to the property and is able to occupy the apartment and can live in the space as a tenant, too. A guarantor is not able to live in or occupy the apartment space, even though they may have to pay for it.
Things to consider before co-signing for an apartment
Co-signing a lease means you assume equal responsibility for an apartment lease when you sign on it. Should your friend or family member not pay the rent for whatever reason, you’re next in line, if you’re the co-signer.
This means you’ll have to get the money to the landlord ASAP. If you’re 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, and ultimately, you’re on the hook if the lessee can’t meet his or her financial obligations. Here are some questions to ask yourself before you agree to become a co-signer on a lease:
1. What is their 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 for you. Factor in this person’s history and various life choices before moving on to other considerations.
2. Do they have a stable job?
Does your friend have a stable job? Can they afford the apartment on the 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.
3. What’s your financial situation?
Take a few moments to think about your part of the bargain. Are you comfortable paying the rent (plus additional utilities and 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.
4. How will this impact your stress levels?
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’ll be able to make their monthly rent payments, reconsider becoming a co-signer.
5. 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, that you’ll 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’re 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’ll be able to help your friend get an apartment, as well as build credit history, both at the same time.
Should you be a co-signer for an apartment?
Deciding to co-sign on a lease isn’t an easy decision and it’s not something that should be taken lightly. Make sure to take your time, do your homework and ask some of the important questions stated above before agreeing to co-sign on anyone’s lease.