Your friend or relative has just asked you a question. Would you co-sign with them on an apartment or house lease? Oh, it’s no big deal, they say. The fact is, we all desire to help our friends and family when they are in need. However, when it comes to co-signing a lease, it is important to first know what this means for you. Co-signing a lease is committing you to legally guaranteeing another person’s lease. Co-signing isn’t always a bad idea, but there are a few things that you want to consider as you weigh whether it is in your best interest to add your signature to the lease.
The legal guarantee that you are providing when you cosign a lease is that the rent will be paid. Additionally, you are ensuring that you will be responsible for paying any fees for damages beyond wear and tear on the rental property.
In the event that the rent is not paid, you (along with your friend or family member) assume the financial responsibilities of the property’s rent. If the tenant cannot or will not pay rent, the responsibility to pay is yours. And, if you fail to pay, your credit could now be adversely affected. Another possibility is that the management company could take you to court to retrieve all funds owed.
As you can see, the decision to co-sign must be a thoughtful one. Below are a few suggestions if you do decide to be a co-signer.
First off, know the renter very well. You don’t need to know all their favorite foods and bands, but you should know their track record. In general, are they good with money? Do they pay bills on time? If you are agreeing to co-sign a lease with your friend or family member, he or she should be willing to show you you bill statements. When you know these details, you will be able to have a better understanding of how this person will act as a renter, vs. in their everyday life.
Next, you need to make sure that you would be willing and able to make the rent payments should your friend or family member not be able to follow through. Also, how would your relationship with that person be affected on the basis of co-signing a lease. Would your name being associated with this person give you a reason to worry?
Lastly, if your friend or family is also planning on having a roommate, it would most likely be in your best interest to not co-sign the lease. Although you may have a world of trust for your friend/family member – you have no idea how this other roommate will behave or what their financial history is like.
While there are many times that co-signing a lease is not in your best interest, there are other times when it makes sense. For instance, if you are willing to step up to make the rent payments in the event that your friend/family member is unable. Or, if your friend/family member has a consistent and reliable history with money. And, as long as you know that your relationship with this person is secure enough to survive despite what happens with the renting situation.
If this is your situation, then moving forward to co-sign the lease would be fine. And, you will also be helping your friend or family member secure a place to live while building up his or her credit. All in all, just make sure to weigh out the pros and cons to make an educated decision about co-signing. It actually is a pretty big deal.