Apartment lease guarantors: How do they work?

You know you need someone to cosign as an apartment lease guarantor so you can get the apartment you want. And maybe you weren’t able to find a friend or family member to cosign with you. Now, you’re researching lease guarantor services and wondering how they work. Smart! Read on for details on how these companies work, what role they play, why landlords like them, how to prepare to apply, and potential costs (and benefits!).

How lease guarantor companies work

Lease guarantor companies help renters get a lease when they don’t qualify on their own and may not want (or can’t get) a family member or friend to act as a cosigner. The guarantor essentially becomes responsible for covering any rent in the event that you default on your lease.

They also “guarantee” that damages will be covered when you move out and that fees (like court and lawyer fees) will be paid in case you end up in a dispute. They make money when they help you get into a place and you pay your rent and do no damage to the unit. They lose money when you don’t pay your rent and cause damage. 

Lease guarantor services have become much more common lately because there’s a real need. While we all want to be able to qualify for an apartment on our own, lease guarantor services help you overcome some rental application qualification obstacles. 

Common reasons people seek lease guarantor services

• Not enough income relative to your rent
  • If rent is more than 30% of your income
  • No job or part-time, inconsistent work
  • You’re a student
• Lack of history, including:
  • Rental history
  • Employment history
  • Or any of the above are from outside of United States
• Poor or nominal credit
  • Marginal credit
  • Minimal credit history
  • Prior bankruptcy

If you are close to qualifying but not quite there, your landlord may ask you to get a co-signer or lease guarantor.

Why would a property manager or landlord accept a guarantor?

Sometimes properties experience higher vacancy rates or want to find ways to make moving in and renting more affordable and accessible, even for folks who don’t meet their application criteria. 

One limitation to lease guarantor services is that services may not be available for all rentals. For example, Rhino only provides services for 500,000 units and Insurent 3500 buildings. 

If your potential landlord doesn’t mention the service, ask them about it. They may be able to offer you an application to a partner service. Or, you can suggest that they sign up with a service to support you and other renters in this situation. 

These types of services are becoming increasingly more common, and it is certainly worth asking about.

How to sign up for a lease guarantor service

Applying for a lease guarantor service is actually pretty similar to applying for an apartment. Depending on their application process, it could take you as little as 30 minutes. Here’s how to get rolling.

Check to see if your landlord accepts lease guarantor services

Some properties have pre-determined partnerships with particular companies. Or they may not accept these types of services at all. Other option: They may never have heard of them and you can help them (and yourself) out!

Research and read reviews of lease guarantor companies 

Read reviews and articles about the lease guarantor services. Compare prices, read the fine print. Every company will receive some complaints; how do they respond? Consider thinking through a sticky situation and give their customer service line a call to see how they respond to your scenario.

Gather your application information 

You’ll need information including income/employment verification, as well as verification that you are who you say you are (ID verification). This means driver’s license, passport, other government issued ID. If you’re self-employed, plan on sharing more documents, including tax returns, bank statements.

If you’re a US or international student, gather more information

You’ll probably be asked to provide a copy of your driver’s license, passport or Visa. Also, your school ID, parent’s passport and income verification.

Get your certificate 

Most application systems are automated and will give you a preliminary yay/nay right away, then followup with an official certificate or letter that says you’re covered. Then you share that certificate with your potential landlord.

What type of lease guarantor fees to expect

There are a variety of different pricing models out there but most lease guarantor companies charge you roughly the equivalent of a typical security deposit—often a month’s rent—with payments spread out over the life of the lease. 

For example, if your rent is $2,000 and your lease is a 12-month lease, the guarantor will likely charge you $166 per month for the service. (However, unlike a security deposit, you do not get any of the money back when you move out.)

There are also a number of other charges to consider, so make sure you read all the fine print in the contract before you sign anything. And compare your options, of course (Check out our Lease guarantor companies reviewed.) 

Typical costs can include:

• Monthly payments for the service
• Application fee
• Renewal fee
• Cancellation fee 
• Bundling (i.e. you may also have to also sign up for one of their other products)

If you miss a rent payment and your guarantor steps in to cover it, don’t forget that you will have to pay them back. Having a guarantor does not mean you’re off the hook; it simply acts as a reassurance for your landlord or property manager that they’ll get paid on time or for damages.

Financial tips for renters considering a lease guarantor

The general rule of thumb is that you don’t want to spend more than 28-30% of your monthly income on rent. If you’ll have to pay 30% or more of your income towards rent, your finances might become pretty tight. 

By getting a lease guarantor, you may be able to qualify for an apartment you wouldn’t have been able to get into, but your monthly costs will also increase.

If you have plenty of savings and minimal debt, that might be okay. But if you’ll be struggling, you may want to consider a few options before committing to a lease that you may not be able to afford for months on end. 

If you cannot afford the rent on your own, you may want to consider the following:

• Getting a roommate to help with rent
• Paying down debt before taking on expensive rent
• Building up savings before moving
• Moving to a slightly less desirable neighborhood
• Selling some stuff before moving
• Obtaining a higher paying job
• Taking on a side hustle

FAQs

Do lease guarantors have to re-sign for me to renew a lease?

It depends quite a bit on your property manager or landlord. If you still don’t meet the income or credit requirements after your lease is up, they may request that you again secure a lease guarantor. Some lease guarantor companies may let you renew without reapplying; others may require that you update all your information and pay another application fee.

Is there a significant difference between a guarantor and cosigner?

The terms co-signer and guarantor are pretty much used interchangeably. While there may be a few technical differences, they play the same role–they reassure your landlord that they’ll get paid rent and reimbursed for any damage costs.

Do roommates need to apply for lease guarantor services too?

Typically a lease guarantee covers the entire lease so you only need one policy per apartment or unit. That doesn’t mean you might not both need to apply, however. Some companies require all people on the lease to apply.

If I can’t pay rent on time, do I have to pay a lease guarantor back?

If you default on your rent, typically, a lease guarantor company will cover those costs in the moment so you still meet the obligations of your lease. But you’re still responsible for paying them back. 

Similarly, if you incur damages to your apartment that exceed your security deposit, they’ll pay your property manager on your behalf — and then try to recoup those costs from you. 

Is a lease guarantor like insurance?

The best way to think about a lease guarantor is that their core goal (and what you’re paying them for) is to help you get into an apartment and stay put during your lease. Unlike an insurance product, if you miss rent or incur damages, you will still have to pay the lease guarantor back — in addition to the monthly payments you agreed to pay when you signed up for their services.

What happens if I don’t think I can pay the guarantor back?

If you don’t think you can pay the guarantor back right away, be proactive by reaching out to their customer service and talk through your options. Whatever you do, don’t avoid the situation. You don’t want to get into a situation where you can’t get into an apartment without a guarantor…and then not even be able to get a guarantor.

If you don’t have the income, rental or credit history to qualify for the apartment you want, getting a co-signer or lease guarantor can be a way to help you get moved-in and stay put. As with any policy or purchase, make sure you understand all the terms and costs and what you (or your co-signer or guarantor) are fully signing up for. You will pay a non-returnable monthly fee and be responsible for paying them back for any rent or damage payments they make on your behalf.