Guarantor vs Cosigner: What’s the Difference?
When a person takes on a rental lease, there are all kinds of questions that come up. One thing that many need (especially younger people with not much credit history) are cosigners or guarantors for their rental agreement. But what are they exactly? And what is the difference between a guarantor vs cosigner… are their benefits to one versus another? There are a lot of good questions that need answers. Here, we will explore these topics.
As one of the premier Atlanta property management solutions, we get asked these questions a lot. These terms a floated around and that creates a lot of confusion. Let’s get to the bottom of this so landlords, property owners, and renters can understand it better.
Table of Contents
- What Is a Guarantor? Understanding Their Role in a Lease
- Differences Between Guarantor vs Cosigner
- FAQ
- For Landlords and Owners: How Property Management Companies Can Help
What Is a Guarantor? Understanding Their Role in a Lease
A guarantor is someone who agrees to step in and cover financial obligations if the primary party can’t meet them. In the case of a lease agreement, this person promises to pay the rent or cover any damages if the tenant cannot. This arrangement provides landlords with an extra layer of security, especially when renting to individuals who might not have a strong credit history.
Typically, guarantors are close family members or friends with solid financial or credit history. They undergo credit checks and need to demonstrate the ability to fulfill the lease’s financial requirements if necessary. It’s important to note that a guarantor’s responsibility is secondary; they only become liable if the tenant defaults.
Differences Between Guarantor vs Cosigner
A guarantor differs from a co-signer. A cosigner shares equal responsibility for the lease from the beginning. A cosigner signs the lease along with the tenant, meaning they are equally responsible for paying rent from day one. If the tenant misses a payment, the landlord can go straight to the cosigner for the money. A guarantor, on the other hand, is more of a safety net. They don’t pay rent unless the tenant fails to do so, and their responsibility only kicks in if things go wrong. Landlords think of guarantor vs cosigner very differently.
For example, let’s say Blake is moving to Atlanta for school and needs an apartment… but like many young people, he doesn’t have much credit history or income yet. His aunt Lisa wants to help him out. If she cosigns, she’s just as responsible for rent as Blake is, meaning if he forgets to pay, the landlord can demand payment from either of them right away. If she acts as a guarantor, she’s only responsible if Blake doesn’t pay at all and the landlord has already tried to collect from him first. Either way, Lisa is putting her credit on the line, but as a cosigner, she has more immediate financial responsibility.
FAQ
Is a guarantor the same as a cosigner?
Not exactly. A cosigner is equally responsible for rent from day one, while a guarantor only steps in if the tenant stops paying. Cosigners share the lease obligation, whereas guarantors are more of a safety net in case things go wrong. It’s important to understand these differences between guarantor vs cosigner.
Does a guarantor have to sign the lease?
Nope! A guarantor doesn’t sign the actual lease like a tenant or cosigner would. Instead, they sign a separate guarantor agreement, which legally binds them to cover rent or damages if the tenant fails to pay. This keeps them financially responsible without giving them tenant rights to live in the unit.
Do they check a guarantor credit when signing a lease?
Yes, most landlords run a credit check on guarantors to make sure they can actually afford to step in if needed. A guarantor is supposed to act as a financial backup, so landlords want to see a solid credit score, steady income, and a low debt-to-income ratio before approving them.
Who should I put as my guarantor?
A guarantor should be someone with good credit and a stable income, typically a parent, relative, or close family friend. Landlords want financial reliability, so whoever you pick needs to show they can comfortably cover your rent if needed. It’s also a good idea to choose someone who trusts you—they’re putting their credit on the line for you, after all!
For Landlords and Owners: How Property Management Companies Can Help
As a landlord or rental property owner, it is helpful to approach your business objectively… allowing cosigners and guarantors is often expected and helps makes sure that you can fill your vacancies. Yet, employing a property management company, such as Bay Property Property Management Group, gives landlords and owners some much-needed peace of mind.
With thorough tenant screening procedures, solid rent collection policies, and the willingness to manage all other things property-related, owning or overseeing a rental property can become the enjoyable experience it should be with full-service management. If you are wondering if accepting lease cosigners or guarantors is right for you or just want to see if you could get more for your investment, contact Bay Property Management Group today. We provide property services in Atlanta, Boston, Philadelphia, Washington D.C., and many other locations.
