These days, it seems like you can buy just about anything with enough cash, and one of the things that tenants in financial straits may buy is a cosigner for their apartment lease.
Consumers who would not otherwise be able to rent a home or apartment can get the rental guarantee they need from a cosigner service.
While the idea of using a cosigner to secure a loan is appealing and novel, you should know exactly how these services function before weighing the advantages and downsides. Before diving in, make sure you have a thorough understanding of the context, including the potential costs and hazards.
Who Can Take Advantage of a Cosigning Service?
You need to have a certain amount of disposable income before you can apply to rent an apartment or house. The most significant issue is your credit score; if you have a low score because of a bad credit history (or if you don’t have much of a credit history at all), a cosigning service can be the difference between getting approved and refused for a rental.
Your prior experience as a renter or homeowner is also a major consideration. A cosigning service is useful for those who are just starting out and don’t yet have an extensive renting history.
How Does It Work?
A cosigner service basically functions as a lease guarantee scheme. This implies that the cosigner service will promise your landlord, management company, or apartment complex that your rent will be paid for a set amount of time in the event that you fall behind on payments.
- Please Apply and Include a Fee
Applying for a cosigner is the initial step in the process of getting one. Even if you’ve been turned down for a rental on your own, or if you haven’t even started looking for a place to call home yet, you may still fill out an application and get pre-approved. There is typically an application fee associated with using a cosigner service, and it can cost anywhere from $50 to $125.
- Have It Accepted
Your housing search may officially begin after your application has been accepted. The cosigner business will issue a document to the apartment complex or landlord stating the percentage of your rent that they will be guaranteeing.
- Find a Room to Rent
You should look for an apartment the same way you would if you didn’t have a cosigner, and then include the co-signing certificate with your rental application. If you have already located a rental property you want to occupy, you may use the certificate to prove your cosigning arrangement to the landlord or property management firm. If you sign the lease, the cosigning service will stand behind your commitment as a cosigner.
- Rent Due
The landlord, management firm, or complex is due each month’s rent payment.
You must make the Cosigning Company a Co Signing Fee payment.
- There is no standard rate or method for cosigning service fees.
Some landlords need a lump sum payment equivalent to a certain proportion of the annual rent, for example 10%, to be paid in advance. Other cosigning services may extend the payments over a longer period of time, with the final cost falling anywhere from 75% to 110% of the monthly rent.
While a cosigning service might facilitate your ability to get a rental, it is not without its drawbacks.
- It May Become Extremely Pricey
Generally speaking, you should budget an additional 6% to 10% of your monthly rent for incidentals. This can build up to a substantial sum of money over time, making it difficult to make rent payments.
- A co-signing company’s guarantee does not extend for the full lease term.
The landlord might not be too keen on having a cosigner who can only promise 3 to 6 months of rent payment on a 12-month lease, since some cosigning firms only guarantee payment for 90 to 180 days.
- Payments Made In Advance Are Final And Non-Refundable
The application fee is nonrefundable if your application is denied for the cosigning service. If you are unable to find a landlord who will rent to you after being authorized by the cosigner service, some or all of the costs may be refunded to you. For instance, in this case, the application cost may be refunded by some service providers and not by others.
Companies that provide services
There are other online cosigner services, however the three most often used are:
- Co-Signer.com. Between 90 and 180 days of rental security is provided by this firm. There is a $75 initial fee added to the total, which includes the cost of running a credit and background check on the customer in addition to the processing fee of $50. If a customer decides to utilize Co-Signer.com, the co signing fee is required immediately. There is a 6% yearly rent payment cost for a 90-day guarantee, and a 10% annual rent payment fee for a 180-day guarantee. If rent is $2,000 per month, for instance, that works up to $24,000 per year. Guarantees of 90 days cost $1,440, while those of 180 days cost $2,400.
- WECOSIGN. If the customer is not approved to sign a lease, the business will return the application cost of $100. For a 12-month lease guarantee, the cosigner charge is split into 12 monthly installments. The cost of cosigning is equal to 10% of the rent each month. A cosigner cost of $200 per month, based on a rent of $2,000, is an example of this. If the borrower is considered to be high risk, WECOSIGN may require an advance payment equal to six months of payments as part of the cosigning fee. This amounts to an initial payment of $1,200, assuming a monthly rent of $2,000.
- Lease Guaranty Insurance from Insurent. For a one-year rental guarantee, Insurent requests an advance payment equal to 75% to 95% of the first month’s rent. There is no application cost for this service, however if the tenant is not a U.S. citizen, the service fee will be equal to 110% of the monthly rent. If the rent is $2,000 per month, then the one-time cost from Insurent is between $1,500 and $2,200.
A co signing service is something to look into if your credit history or lack thereof is preventing you from being approved for a rental. Hiring a firm to act as your cosigner might be costly, but it can save you the hassle of borrowing money from loved ones in order to move into the home of your dreams on your own.