Guarantor vs. Cosigner: Which Is Right For You?

When renting out a property, there are many things that landlords and property managers should look out for.

This is especially true when looking through the rental applications that have been submitted to you.  

Within these applications, there will typically be a few different things that you can see, including cosigners and guarantors. Although these individuals are extremely important, there is typically some confusion that surrounds them.

So, in this article, we will be going over both of these terms, as well as how they differ and how they're alike.

To begin, let's go over the general definition of each term.

What Are Cosigners And Guarantors?

When someone applies for a rental property, there is a chance that they may not make the cut in terms of financial responsibility or a rough history.

In these cases, these applicants will typically provide a cosigner or guarantor to help their case. Having one of these will typically increase the applicant's odds of being accepted.

But, how are they different?

Well, to help answer that question, let's go over the definitions of each one.

What Is A Cosigner?

A cosigner can typically be considered another tenant.

The cosigner signs the lease with the tenant and has the financial responsibility to pay rent and any other rental fees along with the main tenant.

This means that they also have the right to live on the property with the tenant. So, cosigners are typically roommates or any family member that will be living in the property.

However, this cosigner is also responsible for making rent payments if the other tenant fails to pay up.

What Is A Guarantor?

A guarantor, similar to a cosigner, is an individual who does take on the responsibility of the monthly rent if the tenant is unable to.

The main difference, however, is that the guarantor is not considered a tenant and is therefore not allowed on the property.

So, the guarantor ends up serving as a back-up plan for landlords and property managers in the case that the tenant stops paying rent. The guarantor will also be responsible if the tenant fails to pay for any other fees or charges from the rental property.

This position is typically taken by someone like a parent, close friend, family member, or anyone willing to take on the large responsibility.

We can see now the slight differences between a guarantor or co-signer, but why would someone need them?

In the next section, we'll go over some of the most common reasons why a prospective tenant will choose to use a cosigner or guarantor.

Why Use Cosigners & Guarantors?

There can be a ton of different reasons for tenants to have cosigners and guarantors.

Below, we will be going over some of the most common reasons, and why a cosigner or guarantor helps.

Rough Rental History

When prospective tenants have a rough rental history, it can make the landlord feel uneasy about leasing a property out to them.

In these cases, having a cosigner or guarantor with a better history can help increase the chances that the tenant gets accepted. This is mainly because of the fact that these individuals will take on a lot of the responsibility of the tenant.

This way, the landlord does not have to worry as much about missing rental payments or other fees that are part of the rental lease.

Low Credit Scores

Another common reason for tenants to have a guarantor or cosigner is because of a low credit score.

Most landlords require a good credit score from tenants, but a cosigner or guarantor with a good tenant score may also be enough.

Having one of these can be a good way to show the landlord that all of the financial responsibilities will be met how they want it.

Low Income

When a landlord or property manager is reviewing applications, one of the first things they search for is the income.

This is because a low income is typically the clearest sign that the tenant won't be able to cover the rent payment. Thus, a guarantor or co-signer with a higher income may help increase the tenant's chances.

Now, although these are some of the most common reasons, there can be a multitude of other ones depending on specific circumstances.

But, even after knowing the differences between a guarantor and a cosigner, it may still be difficult to really know when each one is useful.

So, in the next section, we will be going over some of the situations where someone may favor a guarantor or a cosigner.

Should I Get A Guarantor Or A Cosigner?

Depending on the tenant's specific circumstances, the landlord may favor requiring a guarantor over a cosigner, or vice versa.

So, below, we will explain some of the common scenarios where one may be more useful than the other.

When To Require A Guarantor

For a tenant that is going to be living alone and needs someone to help financially, then a guarantor is always the best option.

In these cases, the landlord may require the guarantor to put up collateral, such as a month's rent upfront. This means that the guarantor is risking some of their own money for the main tenant.

And, even though they have total financial responsibility for the tenant, they don't have the right to live in the property.

Because of this aspect, a lot of people shy away from becoming a guarantor. This is why it's so important to understand all the rules and regulations around guarantors before finalizing a lease.

When To Require A Cosigner

On the other hand, if the tenant is interested in sharing the living space and also sharing the expenses, a cosigner is the best option.

Not only can a cosigner help with the regular expenses, like monthly rent and the security deposit, but they can also help a tenant get their rental application accepted.

This is because of what we discussed before about tenants having low credit scores or income.

One of the notable drawbacks of having a cosigner, however, is that the cosigner can face an eviction if the tenant fails to pay rent.

Again, this is why it is so important to know everything about becoming a cosigner or adding one to a lease agreement.

Now, after absorbing all of the information in this article, you should have a solid understanding of what guarantors and cosigners are and why they are useful.

However, if you don't understand completely, we hope that these frequently asked questions help clear up any remaining confusion.

Frequently Asked Questions

In this section, we will go over some of the most frequently asked questions regarding cosigners and guarantors.

As a landlord, should I screen guarantors and cosigners along with the tenant?

Since cosigners and guarantors can become as financially responsible for the rental property as the actual tenant, they should also be screened like one.

This means doing things like:

• Requiring proof of income
• Running a background check
• Taking out a full credit report

...and anything else that the landlord typically includes in the tenant screening process.

Although this may sound unnecessary, it is extremely important to remember that a guarantor or cosigner is supposed to financially secure the landlord.

Thus, it is essential to make sure that they are actually able to fulfill this responsibility.

As A Landlord, Should I Favor Applicants Without A Cosigner Or Guarantor?  

As a landlord, you are entitled to choose the most qualified applicant and the one that is going to benefit you the most.

So, for this reason, you are within your rights to decline a tenant because they require a guarantor or cosigner. This is especially true when there is another tenant that better meets your needs and requirements.

However, if your decision is based on other aspects of the tenant's application, it is important to make sure that you are in compliance with fair housing laws.

Bottom Line

When a tenant requires a guarantor or cosigner, it means that they may have no other way to be able to rent a property.

But, this does not mean that you should treat them differently.

If the applicant shows qualities of a good tenant, but they require a cosigner or guarantor, then they should definitely be considered for the rental property.