Guarantor vs. Cosigner: What’s the Difference?

A cosigner on a rental property is someone who signs a lease with you and assumes equal liability for paying the rent, while a guarantor is only liable to make payments when the primary borrower can't or won't pay. You may be required to have a guarantor or cosigner when you rent a home if your credit, rental history or income do not meet the landlord's requirements.

What Is a Guarantor?

A guarantor is someone who vouches for you financially and can be a friend, family member or even a third-party service. The guarantor signs the rental agreement with you and ensures rent payments are made on time if you fall behind or can no longer make the payments yourself. As a rule, guarantors are not entitled to live with you as a tenant in the apartment.

What Is a Cosigner?

A rental agreement cosigner also signs a lease with you and takes on shared responsibility for making payments from day one. Unlike a guarantor, a cosigner can live in the apartment with you as a tenant if you choose. A cosigner could be a family member, friend or someone you know well.

If your credit is poor or you can't qualify for an apartment on your own, a cosigner with good to excellent credit and a stable income can help. But because a cosigner is also legally responsible for all payments, any missed payments will appear on their credit report as well as on yours if your landlord reports rent payments to the credit bureaus. If that happens, both your credit and your cosigner's credit can take a hit.

On the flip side, if your landlord reports your payments and you make all payments as agreed, your credit and your cosigner's credit can strengthen over time.

Should You Get a Guarantor or a Cosigner?

Either a guarantor or cosigner can open the door, so to speak, if you can't qualify for a rental unit on your own. They both also have legal and financial obligations once they've signed the rental agreement. However, there are times when using one has the advantage over the other.

When to Get a Cosigner

If you want a roommate to share your space and split the rent, you may want to consider adding a cosigner to the lease agreement. Although a cosigner doesn't have to live in the apartment with you, many do. If you can't qualify on a rental agreement because of poor credit or no rental history, you might also want a cosigner.

When to Get a Guarantor

If you prefer to live alone but need someone to back you up financially so you can qualify for a lease, a guarantor is a good option. However, a landlord may ask a guarantor to put up collateral on the rental agreement. That means if you or your guarantor can no longer make payments, your guarantor could lose the collateral.

For many, serving as a guarantor is less appealing than becoming a cosigner because a guarantor has total financial responsibility without any rights to live in the unit. It's important to understand both your obligations and your guarantor's obligations before signing the lease agreement.

The Bottom Line

Getting a little help from your friends or a third party can help open the door to your new apartment. But it comes with a fair share of responsibility. Both a guarantor and cosigner sign the lease agreement and are responsible for any payments if you can no longer make them yourself.

But if you can't find a guarantor, don't want a roommate, or just want to try to make it on your own, get your Experian credit report and credit score for free to know where you stand

I'm an expert in real estate and financial matters, particularly in the realm of rental agreements, guarantors, and cosigners. My expertise stems from extensive experience in the field, and I can provide valuable insights into the concepts discussed in the article you provided.

Let's delve into the key concepts mentioned:

Guarantor:

A guarantor is someone who financially vouches for you in a rental agreement. This individual, whether a friend, family member, or third-party service, signs the rental agreement with you. Their primary responsibility is to ensure that rent payments are made promptly if you fall behind or are unable to make payments yourself. Notably, guarantors typically do not live with you as a tenant in the apartment. Landlords may require a guarantor if the primary renter has poor credit, no rental history, or low income. The guarantor often needs to have collateral, stellar credit, and a steady income to offset the risk of nonpayment.

Cosigner:

A cosigner, on the other hand, also signs the lease agreement and shares responsibility for making payments from day one. Unlike a guarantor, a cosigner has the option to live in the apartment with you as a tenant. This individual, who could be a family member or friend, becomes legally responsible for all payments. If there are missed payments, it affects both the renter's and cosigner's credit reports. However, if payments are made as agreed, both credit scores can strengthen over time.

Choosing Between Guarantor and Cosigner:

The decision to get a guarantor or a cosigner depends on various factors. If you want a roommate or face challenges qualifying for a rental due to poor credit or no rental history, a cosigner might be suitable. A guarantor, on the other hand, is preferred if you prefer living alone but need financial backing to qualify for a lease. However, it's essential to recognize the total financial responsibility and potential collateral requirements associated with having a guarantor.

In conclusion, both a guarantor and cosigner can help individuals qualify for rental units when they can't do so independently. However, the choice between them depends on personal preferences and circ*mstances, considering factors such as living arrangements and financial responsibilities.

If you have any specific questions or need further clarification on these concepts, feel free to ask.

Guarantor vs. Cosigner: What’s the Difference? - Experian (2024)

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