A guarantor is someone who signs a lease with you and agrees to uphold the financial obligations that come with renting an apartment, including the rent and any fees associated with the rental.
Basically, a guarantor serves as an assurance to the landlord that if you can’t pay the rent, they will definitely be able to.
If you have a limited credit history, a low credit score, or are trying to secure an apartment in a competitive market, a lease guarantor could help you secure a rental.
Below, we’ll discuss some common scenarios in which a guarantor can help you secure a rental, who might make a suitable guarantor, and what you need to consider before you ask someone to sign on as your guarantor.
What’s the difference between a co-signer and a guarantor?
While the terms “lease guarantor” and “co-signer” are often used interchangeably, there are a couple of differences between these roles.
Both co-signers and guarantors agree to take on financial responsibility for the rental. If you fail to pay the rent, they are liable for it.
A guarantor doesn’t take on any rights to the property. They do not live in the rental, nor are they legally entitled to live there.
A co-signer, on the other hand, is essentially an equal stake partner in your lease. They have the right to live in the unit as a tenant if they wish. Often, a roommate serves as a co-signer.
When might you need a lease guarantor?
There are a number of scenarios in which you may need a lease guarantor to offer extra assurance to your prospective landlord that the rent will always be paid on time. Below are a few example situations in which a guarantor can help.
You have a limited credit history:
If you don’t have a lengthy credit history, it could be tough to convince a landlord that he can count on you to pay the rent on time. Even if you’ve always made your payments on time, if your credit is “new” (meaning your accounts have been open less than two years), your score may still be relatively low. Basically, there just isn’t enough data to suggest that a landlord can trust you to pay your rent on time.
In some cases, landlords may rent to you in good faith, but you could be passed over for a candidate with a stronger credit history if you’re in a competitive rental market.
Sometimes you can get around a limited credit history by showing proof that you have a consistent income, but, in some cases, this still won’t be enough. That’s where a guarantor comes in. Even though you’re perfectly capable of paying the rent on your own, the guarantor shows your landlord that there is no cause for concern.
You have red flags on your rental history
If you have an eviction on your credit report, it could be challenging to secure a rental in the future, especially if you wish to live alone. Evictions can stay on your credit report for up to seven years and, unsurprisingly, serve as a red flag for future landlords. Bringing on a guarantor could help a prospective landlord overlook an eviction and allow you to start rebuilding your rental history.
You have a low income
If your income is low compared to the amount of rent you are trying to pay, it could be challenging to secure a rental. Even though you may be fully capable of making the payment every month, landlords often like to see that you are earning at least three times as much as the cost of the rent.
Of course, in cities with a high cost of living, like San Francisco or New York, this might be an unrealistic request, especially if you’re only at the beginning of your career. While it’s essential that you are realistic about how much you can afford to spend on rent, you may be able to stretch beyond the 30% rule. But, even if you’re confident that you can, your future landlord may not be. Having a guarantor sign your lease with you could help you win over a skeptical landlord.
You have no rental history or references
Landlords need to know that you can make your rent payments on time, but they also want assurance that you’ll be a good tenant. The last thing your landlord needs is someone who is noisy, causes property damage, or disrupts the neighbors. This is where having references from past landlords is key.
If you’re a new renter and don’t have any references, a landlord may be hesitant to rent to you. They have no way of knowing that you won’t cause damage to the property, and they may be concerned that if you do, you won’t be able to pay for the repairs. When you use a guarantor, they take on responsibility for all financial obligations associated with the lease, including any fees related to property damage. With this in mind, a guarantor could be the key to securing your first rental.
The rental market is highly competitive
Lease guarantors can also come into play when you are trying to rent in a competitive market. Even if you have good credit and a consistent income, it can be tough to compete against dozens of applicants who boast the same qualifications.
Having a slew of glowing references from past landlords will help you stand out, but even those only go so far if the landlord isn’t confident you’ll be able to pay on time every month. Bringing on a guarantor could be enough to tip the table in your favor and beat out the other candidates.
What are the requirements for a guarantor?
Generally speaking, a lease guarantor will need to have excellent credit and proof of a stable income in order to qualify. Depending on your landlord, a guarantor may also be subject to additional requirements.
Some landlords won’t accept a guarantor unless they are a homeowner. Presumably, this is because a home is an asset that could be leveraged if the landlord ever needed to collect a debt.
Who should you ask to be your guarantor?
Choosing who to ask to act as your guarantor is a big decision. This person is doing an enormous favor for you and putting their own finances and credit rating on the line in doing so.
Before you ask anyone to do this, take a close look at your finances. Are you realistic about how much rent you can pay? If you fall short, your guarantor will be responsible, and you could risk putting them in a tight financial situation, or worse, damaging your relationship with them.
This is not a decision to take lightly. You should be confident that you can make your rent payments before you put someone else’s credit history on the line.
Because this is such a big responsibility, many renters ask their parents or a close family member or friend to act as their guarantor. If you have a close relationship with your family and they are financially equipped to take on this responsibility, this is a good option.
If you don’t have anyone in your family or friend circle that can serve as a guarantor, there are still options.
In some cases, your work might coordinate a guarantor for you. This is most common with large corporations and usually only happens when they need a new hire to relocate.
Sometimes a church, non-profit organization, or government agency will act as a guarantor. The most common instance of this is for low-income families or immigrant families, but there may be other scenarios as well.
You can also secure a guarantor through an agency. Guarantor agencies can act as institutional guarantors on your behalf. Essentially, you pay them a percentage of what you will pay in rent (usually between 4 and 10%), and they will sign as your guarantor on the lease. The main caveat with this is that you will have to pay the fee for the year upfront. So, if you don’t have the funds to do so, this may not be a good option.
How to ask someone to be your guarantor
Asking someone to act as your guarantor represents a significant financial obligation for the other party, so you shouldn’t be cavalier about how you ask.
In order to inspire confidence, show the person that you’ve given this situation careful consideration and that you understand the gravity of what you’re asking.
Be prepared to provide documentation proving that you are capable of paying the rent. In some cases, your prospective guarantor may want to see a copy of your credit report to ensure that you don’t have any bad marks. If you do, be upfront about them. Show that you’ve learned from past mistakes.
You should also do your best to educate this person about the responsibilities that come with acting as a guarantor and what will be expected of them during the application process.
They may need to provide a copy of their recent paystubs, and they will likely be asked to authorize a credit check and even a background check. Is your prospective guarantor amenable to this?
What if you can’t find a guarantor?
If you find yourself in a position where you can’t find a guarantor, don’t lose hope. If you’re willing to be flexible, you may still have a good chance at securing a rental.
- Find a roommate to co-sign: If you’re working to build your credit and rental history, sharing the financial responsibilities with a roommate might make it easier to do so. If you can find a roommate with good credit to split the rent with you, you will likely have an easier time securing a rental.
- Offer to pay more up front: Cash can go a long way to boosting a landlord’s confidence. If you offer to pay an extra months’ rent up front, they might be more open to taking you on as a tenant.
- Offer to pay more rent: It’s not ideal, but if you’re capable of doing so, offering to pay more rent might show the landlord that you’re serious and force them to take a second look at your application.
- Find a sublet: If you have a limited rental history, a sublet could be an efficient way for you to prove yourself as a tenant. Some sublet arrangements have more stringent screening processes than others, but they are typically short-term arrangements so you could walk away with a glowing rental reference in a matter of months. Additionally, sublet listing may not be as competitive as year-long leases, so you might have a better chance at being selected without a guarantor.
The bottom line
For those with a poor or limited credit and/or rental history, a guarantor could help you qualify for a rental that you may not be approved for on your own. Having a guarantor sign your lease with you could be a great way to build a positive rental history. But, before you bring a guarantor on, you need to be sure you can afford the rent on your own, as your failure to pay could have financial repercussions for your guarantor.
