Suppose a friend or relative asks if you'd be interested in cosigning an apartment lease. Out of good nature, you may be compelled to sign it without thought.
However, in doing so you may be getting yourself into a sticky situation.
Be it with whomever, it is always better to give cosigning a lease some serious thought instead of rushing into it. Much like many other decisions, co-signing a lease also requires thorough analysis and contemplation.
Quite a number of people would describe this experience as horrid or frustrating. The reason for this mostly starts with trust issues between the cosigner and cosignee.
Knowing what you are in for is a good start for analysis.
Think about the consequences of cosigning. Ask yourself how well you know the lessee. Is he or she trustworthy financially? Are they responsible? Would they ever consider screwing you over? Do they respect you?
These are just some of the basic questions you need to ask yourself before cosigning an apartment. But it gets even deeper than that.
Before you cosign your name on someone else's lease, here are some of the things to consider.
Your role as the cosigner
Prior to signing the lease, it is important to recognize your responsibility as cosigner. A cosigner basically acts as a guarantor.
This means that you are legally held responsible for paying the rent and whatever damages there may be. Your work is to ensure that the rent is always paid, regardless of financial circumstances.
Once you add your signature to the contract, there’s no turning back. (Well, not until the contract expires anyway).
Making this choice will ultimately affect your financial status, so you have to make certain that you won’t be regretting it at the end of the day.
Paying your rent
A big issue with cosigning is that trust is often broken. It is easy to take whatever you have for granted. In this case, the tenant may start slacking behind in paying the rent on time or not paying it at all.
Perhaps because they have bad spending habits, or maybe because your relationship means you could spare some coins to cover the rent. Whatever the reason, paying rent is still your responsibility as the cosigner.
This implies that you have also conceded to co-assume whichever expenses in the apartment. In the case where the apartment lessee is unable to pay the rent, then the tasks fully falls on you.
If you are the cosigner and you are also unable to pay rent, then you have reneged. This will be detailed to the credit agencies you’ve signed with.
Needless to say, this can horribly taint your credit score. In dire situations, you may wind up in lawsuits and potentially have liens put on your property until the landlord gets what they're owed.
Even if you don’t find yourself in regret and wishful thinking, your relationship with the tenant is bound to receive a blow. Once the trust is broken, rebuilding relationships is going to be tough.
Knowing the tenant
The risk of cosigning a lease with someone you're not well acquainted with is too high. Anyone will tell you that this is one of the biggest mistakes you can make when cosigning.
One of the reasons why this is so strongly opposed is because there are endless possibilities of what they may turn out to be. They may back out before the end of the contract and you could find yourself in a dilemma.
Although your role as cosigner is solid, knowing how well the tenant is ready for the task will help you acknowledge their financial and managerial competence.
Character says a lot about people. Their spending habits and financial competence is reflected in their character. So, before you sign the lease, make certain that you know the renter very well.
- Are they financially independent?
- Do they have good spending habits?
- Do they take financial responsibilities as seriously as they should?
- Are they capable of paying the rent every month?
How well they handle their money could tell you a lot about what you're about to get yourself into.
Generally speaking, you shouldn't even consider cosigning for someone unless you've known them for at least a couple years.
And when we say know them, we mean more than a general acquaintance or casual friendship at work. It should be one of your best friends that you truly trust.
Knowing yourself
A lasting cosigned lease is primarily based on how prepared and committed the cosigner is. While knowing the renter very well is a definite bonus, you as the cosigner also have to know if you're up to the task.
As was with the renter, ask yourself how good you are with money. Do you pay your bills on time? Are you financially responsible?
A good self-analysis will let you know if you'd be really committed to paying rent or taking responsibility if the person you're cosigning for doesn't live up to their obligations.
You should be comfortable with the role you have to play or you may otherwise end up in jeopardy.
A third party?
If the person you're cosigning for also plans on moving in with someone else, you probably shouldn't cosign. Especially if you don't know the person they're moving in with.
As we mentioned earlier, knowing a person well plays a role in deciding to cosign an apartment. The issue here is you won't know the third party’s financial credibility as well as you know the tenant's.
Perhaps they have poor spending habits or they aren't financially responsible. Agreeing to this could be a great risk as you aren't assured the rent will be paid.
Your financial baggage
Even if your cosigner is financially responsible and has a good track record of paying bills on time, you should still be able to keep your word.
If you feel it’s too much to ask for, then don't cosign. Paying the rent monthly is both your responsibilities and if you fail to do so it may leave a sour patch in your relationship.
That means that their rent should also be part of your budget in addition to other expenses. Would you still be able to meet your regular expenses should an impromptu situation arise?
Have you planned yourself well enough to support your finances? If not, then don't sign the lease, as doing so may as well be sabotage.
The number one question you need to ask yourself before cosigning is: "Can I afford to pay their rent if they can't?"
If the answer is no, then don't cosign.
Can you handle the stress?
Co-signing a lease could introduce more stress into your life. Disagreements may happen sometimes and sharing financial responsibility with someone else is a lot to take on.
Constantly worrying about money and the well-being of the person you're cosigning for could also be overwhelming. Therefore, if you're one to overthink and mope, then co-signing a lease isn't the best option for you.
This is a big factor a lot of people don't consider when cosigning. It's easy to blame the other person when they can't pay their rent and end up messing up your credit.
But always remember, the final say is yours. While it might be difficult and uncomfortable, you can always say no.
When you should co sign a lease
Once you've done your own bit of contemplation, then adding your signature is the last stop. These are some of the only instances when you should cosign a lease for someone else:
- If you are certain that you will pay the rent on time when your cosignee is unable to do so.
- If your cosignee is financially responsible and has proven to be reliable in committing to pay the rent on time.
- If you have a solid friendship capable of enduring whatever problems that may arise regarding the lease.
Should you cosign?
Ultimately, it comes down to how you feel about your personal finances and the person you're cosigning for. If you have even the slightest bit of doubt, say no. You don't have to be mean or rude about it. Simply stating that you don't feel comfortable cosigning for them is enough.
If they resent you for it or pressure you, then take it as a sign that maybe you shouldn't be friends. After all, the reason they need a cosigner in the first place is because they have a history of financial problems. It's not your responsibility to make up for that.
And if you do end up cosigning for an apartment, be prepared to take on all the responsibilities that come along with it.
