Personal Finance

How To Find A Cosigner For An Apartment

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 5 minute read

There is a growing market for cosigners to sign apartment leases for low-income tenants. If a consumer does not have the credit history or income to qualify for a rental on their own, a cosigner service can guarantee that the rent will be paid each month. 

Cosigner services are an intriguing notion, but before you weigh the pros and cons, you should have a firm grasp on how they operate. Don’t rush into something without first gathering as much information as possible, including any downsides and associated costs.

Who Can Profit from a Co-Signature Service?

Several individual financial criteria determine if you meet the requirements to rent an apartment or property. The most important factor is your credit score; if you have a low score due to poor credit history or no credit history at all, a cosigning service can be the difference between being approved and denied for a rental.

Your prior experience as a renter or homeowner is also a significant consideration. New renters without a long renting history can also profit from using a cosigning service.

How It Performs

A cosigner service is similar to a lease guarantee scheme in many respects. What this implies is that the cosigner service promises your landlord, management company, or apartment complex that your rent will be paid for a set amount of time if you fall behind on payments.

1. Send an application and the required fee.

To obtain a cosigner, a buyer must first fill out an application. Yet 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, you may still fill out an application and have someone help you find one. The application fee for using a cosigner service often costs between $50 and $125.

2. Obtain approval for

After your application has been accepted, you can begin your housing search. When you use a cosigner service, they will issue you a certificate stating what percentage of your rent will be guaranteed by their company.

3. Find a Residence to Rent

Find a place to live the same way you would if you didn’t have a cosigner, and include the cosigning certificate with your rental application.

If you’ve already located a rental property you’d want to occupy, you can use this certificate to prove your cosigning arrangement to the landlord or property management company. If you sign the lease, the cosigning service will stand behind your commitment as a co-signer.

4. Paying rent

The landlord, management firm, or complex is due monthly rent payments.

5. Pay the co-signing fee to the co-signing business.

The fees associated with using a cosigning service can vary widely. Some landlords want an initial, full year’s rent payment, while others only require a deposit equal to one month’s rent.

Other cosigning services allow you to make smaller monthly installments, with the total amount owed ranging from 75% to 110% of the monthly rent.

Risks

A cosigning service’s benefits in helping you secure a rental are not without drawbacks, though.

1. It Might Be Very Pricey

It is common practice to budget an extra 6-10% of the monthly rent in case of unforeseen circumstances. This can quickly become a substantial sum of money, making it difficult to keep up with your rent payments.

2. The Lease Term Is Not Guaranteed by Cosigning Companies

Landlords may not be willing to work with you if your cosigner can only guarantee 3 to 6 months of rent on a 12-month lease, as is the case with some cosigning firms.

3. There is No Refund for Upfront Fees

The application fee is nonrefundable if your application for the cosigning service is denied. However, if you are unable to find a landlord who will rent to you after being approved by the cosigner service, you may be eligible to receive a return of a portion of your expenses.

For instance, in this case, some service providers may be willing to return the application cost while others will not.

Service Providers

While several online cosigner services have cropped up recently, the three that have proven to be the most reliable and trustworthy are:

  1. Co-Signer.com. Short-term leases (between 90 and 180 days) are covered by this firm’s guarantee. A consumer must pay a $75 application cost, which includes a credit and background check, plus a $50 processing fee. The cosigning charge is payable in full upon the consumer’s agreement to employ Co-services. Signer.com’s charge for a 90-day guarantee is 6% of the yearly rent payment, while the fee for a 180-day guarantee is 10% of the annual rent payment. Let’s say the rent is $2,000 per month, for instance; that’s $24,000 per year. Prices start at $1,440 for a 90-day warranty and go up to $2,400 for a 180-day warranty.
  2. WECOSIGN. This service requires an upfront application fee of $100, which is reimbursed to the customer if they are not approved to sign a lease. The cosigner charge for a one-year lease guarantee is divided into 12 monthly installments and paid through this service. 10% of the rent every month is the cosigning charge. For a monthly rent of $2,000, the cosigner would be expected to pay $200. When taking on a high-risk client, WE COSIGN has the option of requiring 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.
  3. Service of Guarantor for Insured Leases. Insurance requires an advance deposit equal to 75% to 95% of one month’s rent in order to guarantee a lease for a full year. There is no application fee for this service, but it costs 110% of the monthly rent if the applicant is not a U.S. citizen or permanent resident. As a result, if the rent is $2,000 per month, the one-time cost from Insurent is between $1,500 and $2,200.

Bottom Line

Sometimes you need a helping hand, and if your lack of credit history is keeping you from renting an apartment, a cosigning service may be something to look into.

While it may be expensive, hiring a service to act as your cosigner relieves you of having to ask friends or family members for money, allowing you to rent the place of your dreams on your own.

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