Co-Signers Vs. Guarantors: What To Know

By Ashley Paskill on January 24, 2022

As a property manager in a college town, it can be difficult to find your most ideal tenants, especially one that does not need a co-signer or guarantor. Knowing how to navigate student tenants who require a co-signer or guarantor can seem intimidating, but knowing what these things are and how to handle tenants that may need to have them.

What is a co-signer?

A co-signer is usually needed when a renter does not have enough credit or they have a limited credit history. Students are young, so they have not had too much time to build credit. Co-signers are on the book if the renter cannot pay rent. A co-signer is able to occupy the rental space with the person, whether it is a roommate, family member, or another person.

Many property managers also look at income when they are determining who will make good tenants. College students may have a job, but many do not. A co-signer will be responsible if the renter cannot pay their rent. Also, students may not have lived on their own outside of the dorms. This simply means that they have a lot to learn. Requiring them to have a co-signer can help them understand all that is involved with the leasing and renting process.

In order to ensure that the student can be a good tenant, even with a cosigner, conduct background checks and collect pay stubs. The pay stubs should prove the “40x rule,” which means that the co-signer’s yearly income is 40 times the monthly rent. For example, if the rent is $1,000, the co-signer’s yearly income should be $40,000. Being able to take these steps can protect you and your renters so they have a place to live.

Get the student’s parents or guardians involved, even if they opt to not be a co-signer. Having a parent, or even both parents, be co-signers will allow extra security. Some parents may want to pay for the whole semester upfront, so this ensures you get your money early. If not early, you will get your rent payments on time each month. If the parent(s) or guardian of the student will not sign on to be a co-signer, have their contact information on hand so you can keep them in the loop of their student’s payments.

Image: Sora Shimazaki via https://www.pexels.com/photo/multiracial-colleagues-shaking-hands-at-work-5668838/

Guarantor information

A lease guarantor is someone, typically a family member, close relative, or friend, that becomes financially responsible for the rent if the person is unable to pay for whatever reason. Guarantors usually aid renters with a limited credit history or a low income. Unlike co-signers, guarantors are unable to live in the rental space with the renter.

Consider requiring students to have a guarantor if they have a low credit score (below 629), their income is less than three times the rent, they are renting their first apartment, they do not have a steady employment history, or their landlord references are unfavorable. Also, students who are looking to live alone should have a guarantor instead of a co-signer as guarantors cannot live on the property when the renter is living there.

When determining whether or not a guarantor is reliable, be sure to perform credit, criminal, and eviction checks to ensure that they meet whatever criteria you have set. Have the guarantor fill out a rental application to have them check their background to ensure they meet your needs. Going through these extra steps will protect you from tenants and guarantors who are unable to pay. Most landlords have strict guidelines for their guarantors to ensure they get the money they expect from rent.

General tips

You may opt to require students have either a co-signer or guarantor to protect yourself and ensure that you get the money you need. This should be done, even if the student seems like they can sign the lease on their own. You may not do this for other tenants, but it is a protection you should require for student renters.

Ensure that the person who agrees to be a co-signer or guarantor knows what is expected. While the person may be financially capable of being a co-signer or guarantor, they may not feel comfortable doing so for a variety of reasons. Make sure they are okay with covering the tenant’s rent if they are unable to pay. Otherwise, this may put a strain on the relationship between the tenant and the potential co-signer or guarantor.

In both cases, ensure that the person is financially capable of financially supporting the renter if needed. Do employment and credit checks. You may even consider checking pay stubs every so often to be sure the person is still in good financial standing.

Understand the differences between co-signers and guarantors and be able to enforce what this means for your tenants. Being able to help tenants decide what situation is best for them can help them decide how to move forward and decide who they want to bring on to help them.

While navigating student rent is tricky, knowing about co-signers and guarantors can ensure you can keep your properties open for student tenants.

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