Guarantor Vs. Cosigner: What You Need To Know

If you are reading this article, I assume you are getting ready to sign a lease. Congratulations! The hardest part is nearly over. I’ve been there. I can empathize with the stress that comes hand-in-hand with looking for an apartment in NYC. The long nights sifting through every apartment site you can get your hands on, the pit that forms in your stomach when the leasing agent contacts you to let you know someone got your dream space before you, the tediously long application process… I know all about it. But, if you’re at the point where it is now time to consider a guarantor or a cosigner, you are in the home stretch. 

The two terms guarantor and cosigner can become a bit tricky, however. With similar ideas, but two very different meanings in terms of legality measures, it is best to fully understand the two before proceeding. First, let’s define the two. 

What is a Guarantor

A guarantor is a trusted person that legally agrees to assist as a backup in case you default on your rent payments. Usually, a guarantor would sign an agreement that states their legal obligations. This agreement is part of the lease-signing process. So, why would you need a guarantor? In the state of New York you must meet a strict set of requirements in order to rent an apartment. According to writers at RentHop, you need to make 40-50x monthly rent, have a stable job, good credit history, a social security number, a good rental history, and proof of tax returns. The likelihood of a young adult being able to meet these requirements is unlikely, so that’s where a guarantor comes in. A guarantor must be someone that you can trust and vice versa because in the case that you are unable to pay your rent, the money will come out of their account. The strict requirements are the landlord’s way of ensuring that they will receive the money one way or another. However, your guarantor must meet different requirements than the ones outlined for a tenant. Your guarantor must have an exceptional credit score, must make 80x the monthly rent, and have a stable financial history. The only other rule that can sometimes be enforced with guarantors is that they may have to reside in the same state you are renting in. Some landlords may be willing to forgo this requirement if you’re willing to pay more upfront in the form of a security deposit. If you are unable to find someone to be your guarantor, there are third-party companies who will charge you a fee in exchange for their service. Your guarantor, whether it be a bank/company or someone of your choice, will be signed onto the lease which serves as the legally binding document. Just because a guarantor is on your lease, however, does not mean they are a tenant. 

What is a Co-Signer?

A co-signer is someone that takes on the same role as a guarantor, but they are legally considered a resident of the apartment. This means that they are expected to take on tenant responsibilities. For example, being equally as responsible for rent. However, if you do not pay your share of the rent then the full amount would have to be paid by them. If this happens, don’t stress too much. This is why we recommend asking someone you really trust to be either your guarantor or co-signer in hopes they will be understanding of your situation. Life happens! It is also crucial to note that co-signers for apartments and homeowners are very different. In the case that you are a homeowner and are seeking out a co-signer, it would be synonymous to a guarantor for an apartment. The co-signer for a homeowner would not be legally considered a tenant, but would uphold all other responsibilities of a co-signer/guarantor. So, let’s say you needed to take out a mortgage but did not financially qualify for it, a co-signer would then sign for you and be held accountable if you defaulted on your mortgage payments. 

What are the Risks for a Guarantor or a Co-Signer

Now that you know the definition of both, hopefully you can make a distinction between the two when it comes time to sign the lease. Again, a guarantor and co-signer are essentially the same thing. The one primary thing separating the terms is whether they will be living under the same roof as you or not. There are smaller discrepancies between the two. For example: a guarantor can be signed from the hands of a third-party company, but a co-signer must be someone that is going to live with you. But let’s say that you are unable to pay your rent, so the landlord turns to your co-signer or guarantor. They come back and say that they are too unable to pay the rent. If you are under the guise of a co-signer instead of a guarantor you are now at a high risk of eviction because one way or another; the landlord is going to want their money. The landlord will most likely come after both of you for it. You could find yourself in a tricky situation that could end in a court case against you. This is a worst case scenario, but you always want to be prepared. On the other hand, a guarantor will have collateral in line that they are able to offer up if they do not have the money to cover your rent. The likelihood of you being evicted in this scenario is then lowered by a significant amount. Ensure that you are as upfront with your co-signer/guarantor as possible. Ask all the right questions to establish mutual transparency and create a foundation that will not have landlords sending you threatening emails! 

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