If a friend or relative asks you to co-sign on an apartment lease, should you do it?
Of course, we all want to help friends and family in need, but you have to be careful when it comes to the commitment of legally guaranteeing another person’s apartment lease.
Here are some items you will want to weigh carefully as you consider whether to add your signature.
When you co-sign an apartment lease, you give your legal guarantee that the rent on that apartment will be paid. You are also responsible for paying any fees for damages on that apartment beyond normal wear and tear, for instance.
Read more: Do You Need an Apartment Co-Signer?
When you co-sign, you assume the financial responsibilities of renting that apartment. If the tenant cannot or does not pay the rent — and you’re the apartment lease co-signer – then the responsibility falls to you to pay it. If you cannot, then you are in default. Your failure to pay the rent will be reported to your credit agencies, which could adversely affect your credit score. You’ll be as responsible for the rent as if it was your apartment, including the possibility of being taken to court or having your wages garnished.
Obviously, do not make the decision to co-sign lightly.
Before co-signing a loan for someone, make sure you know them very well. We’re not saying their favorite color or favorite Bond film; you should know their spending habits. Are they good with money? Do they have a good track record with paying bills on time? Do they have a consistent source of income? Can they afford rent each month? Ask them to show you bill statements to make sure they are not constantly getting hit with late fees. Knowing these details will give you a better picture of who they’ll be as a renter.
Ask yourself a few questions, too. Would you be able to make the payments, should your friend or family member not be able to pay the rent? Would you be able to handle the added stress? Would having to pay some of the rent cause damage to your relationship? There can be serious consequences to being a cosigner when things go wrong.
If your friend or family member has a roommate, you are probably better off NOT co-signing the apartment lease. No matter how much you trust the person you know, you’re also taking on responsibility for the roommate’s portion of the rent.
As with the lease itself, everything can be negotiated if you’re willing to put in the time (and work with a good lawyer). You can negotiate to be responsible for only a portion of the lease, or make an agreement with the landlord for a payment plan if the tenant doesn’t pay. These take a lot of time, effort, and legal help to make sure everything is enforceable, but can cover for some of the riskier situations ahead of time.
There are certain times when it makes sense to co-sign a lease:
If these conditions are met, you might go ahead and co-sign the apartment lease. If you do, you will be helping your friend or family member secure an apartment and build up credit at the same time!