As a landlord or rental agent, one of the most crucial aspects of your job is to ensure that you have reliable tenants. Your tenants should be able to pay their rent on time and take care of the property. However, this can be a challenge, especially if you are dealing with first-time renters. They usually have poor credit or rental histories. There’s always a chance you’ll come across a potential tenant who appears like a perfect fit. However, they may not quite fit your requirements.
Of course, when this happens, you could always continue with other candidates. However, It depends on the time of year, the market you’re in, or the number of qualified candidates you’re evaluating. This could lead to extended vacancy periods.
Landlords and rental agents may have to take the risk of renting to a potentially good tenant. This may be the case even though they don’t fully meet the criteria. Requiring lease guarantors or co-signers may mitigate the risks.
Difference Between a Guarantor vs. Co-Signer
A lease guarantor and co-signer are both individuals who are willing to take financial responsibility for the tenant’s obligations under a lease agreement. People often use the two terms interchangeably. They are different types of individuals, however, with varying levels of responsibility and authority.
A co-signer is an individual who signs the lease agreement along with the tenant, indicating that they will be responsible for rent payments and any other obligations under the lease. This means that the co-signer has the same legal rights and responsibilities as the tenant. The co-signer will be liable for any unpaid rent, damages, or other costs associated with the tenant’s lease. The landlord allows them to occupy the unit as a tenant during the lease term. They could be a family member, a roommate, or a partner hoping to split the costs of renting.
On the other hand, a lease guarantor is an individual who agrees to pay the rent or any other costs if the tenant is unable to fulfill their obligations under the lease agreement. The guarantor does not sign the lease agreement and limits their liability to specific obligations, such as rent payments. The landlord does not allow the guarantor to occupy the property as a tenant. Usually, co-signers are parents of a student tenant, a family member, or a close friend.
When Should a Landlord Require a Co-Signer?
Landlords should require a co-signer when the tenant does not meet their financial requirements. For instance, the tenant has a low credit score, unstable employment history, or insufficient income. Landlords or property managers can also use co-signers when the tenant has no rental history. This is because it is difficult to determine their ability to pay rent.
If a landlord decides to require a co-signer, they should ensure that the co-signer meets the same requirements as the tenant. For example, if the landlord requires a credit score of 650 for the tenant, the co-signer should also have a credit score of 650 or higher.
When Should a Landlord Require a Guarantor?
A landlord should require a guarantor when they want additional security that the tenant will meet their financial obligations under the lease agreement. They typically require first-time renters, international students, or those with low credit scores to have a guarantor.
Unlike co-signers, landlords should ensure that the guarantor meets specific financial requirements, such as having a stable income and a good credit score. Additionally, landlords should have a clear understanding of the guarantor’s liability and ensure that the lease agreement clearly outlines their obligations.
A tenant may need a guarantor if he or she:
- has a credit score below 629
- does not make three times the rent
- is renting his or her first apartment
- has no stable employment history
- has unfavorable landlord references
You should do a thorough credit, criminal, and eviction check on the guarantor to make sure they can fulfill your requirements before relying on them completely.
How a Leasing Agent Screen a Lease Guarantor and Co-Signer
When screening a lease guarantor or co-signer, leasing agents should follow the same process they use to screen tenants. This includes conducting a background check, a credit check, and verifying employment and income.
For guarantors, leasing agents should ensure that the individual has sufficient income and assets to cover the tenant’s rent if needed. Additionally, they should verify that the guarantor has a stable income source and a good credit score.
For co-signers, leasing agents should ensure that the individual meets the same requirements as the tenant. This includes verifying their employment, income, credit score, and rental history.
You can gather this data by requesting a rental application form from interested tenants.
In conclusion, lease guarantors and co-signers provide additional security for landlords and rental agents when leasing to tenants with poor credit or rental histories. While both offer financial protection, they differ in their roles and responsibilities. By understanding the difference between these two options and when to require them, landlords and rental agents can ensure that they have reliable tenants who can take care of their property and pay rent on time.
Publishing a listing on Padleads opens you up to the possibility of receiving several leads. Some of them will be potentially good tenants that simply do not pass the financial criteria yet. This may lead you to reject their application. However, if you are open to having guarantors or co-signers, then you won’t have to miss the chance of finding a great tenant.