Guarantor vs. Co-Signer: A Millennial's Guide

Posted by: TheGuarantors on August 4, 2021

Finding your dream apartment is no easy task, and it can be even more difficult if you do not meet the financial requirements for the apartment of your choice. Landlords want you to have a good credit score and financial stability so that they can trust you to pay the rent on time. So, in the event you do not qualify on your own, your landlord may ask you to get a co-signer or a guarantor to complete the rental application. But which should you pick: guarantor vs. co-signer?

Co-signers and guarantors sign the lease with you and fulfill the purpose of taking responsibility for the monthly rent. While these terms are used interchangeably, they have different roles, duties, and obligations. Let's discuss the differences between a guarantor vs. cosigner and how they can help your rental application!

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Who is a guarantor?

A guarantor is a party who vouches for you. They sign and agree to the terms set on the lease by your landlord, most notably the monthly rental payments. Keep in mind that a guarantor can be your family member, friends, or in some cases, a third-party guarantor.

A guarantor assures the landlord that the rent will be paid without any worries. A guarantor, however, isn't entitled to occupy and live in the apartment.

Who is a co-signer?

A co-signer is a person who signs the lease along with you to assure financial responsibility to the landlord. They have a good credit score and a high income. A co-signer, however, can live in the apartment and has more rights, unlike a guarantor.

A co-signer is equally responsible for splitting rent, utility fees and making timely monthly payments.

Difference Between Guarantor Vs. Co-Signer

Roles and Obligations

Guarantor

Co-Signer

Who are they?

A person or third-party company

A person (parent or roommate)

Rent obligations

Pays the rent only when the tenant fails to pay

Pays the rent monthly by splitting rent with the tenant

Annual Income (including liquid assets)

40-80 times the monthly rent

70-80 times the monthly rent

Can they live in the rented property with you?

No

Yes

Risk of eviction from failing to pay rent

Medium

High

 

Copy of Guarantor vs. Co-Signor

Guarantor vs. Co-signer: Who's better for me?

Your decision to choose a guarantor vs. co-signer depends on who will vouch for you financially and whether you want to live alone or with roommates. The first four differences are pretty self-explanatory from the table above, but let's talk about the last one, i.e., the risk of eviction.

A co-signer can provide significant benefits like splitting the rent. But they also take a higher risk by signing the lease. If your co-signer roommate fails to pay the rent, the burden can fall on you. Even when you've paid your portion of the rent, you run the risk of eviction. You can also be sued for the entire lease term.

A guarantor, however, uses collateral as a pledge to the landlord. If the lease has defaulted, they could lose the collateral they put up. Ultimately, you could be sued by the guarantor if you fail to pay them back.

Related: What happens to the tenants if the guarantor decides to exit from the contract of rental property?

Be Prepared To Ask These Questions

Guarantor vs. co-signer, no matter whom you go with, don't hesitate to ask these questions.

  • Do you have a good credit score?
  • Do you have a good source of income?
  • Will you be able to pay my rent if I fail to do so?

Be Prepared To Answer These Questions

A potential loss of income can arise from unemployment, health issues, or any other reason.

Your guarantor or co-signer can ask you a set of questions to clarify what you would do in times of distress. Prepare yourself to answer some of these questions below.

  • How would you repay if something went wrong?
  • If the guarantor or co-signer were forced to pay rent for a long time, what would you do?

The quest to choose a guarantor vs. co-signer isn't that difficult once you understand the nuances of their roles. That is the key to building a solid relationship with your guarantor or co-signer.