When a friend or loved one asks you to cosign on an Orlando apartment lease, you can cast yourself in the role of being a savior by doing so. There are, however, things you will want to consider before you sign on the dotted line. Taking on the financial risk of becoming a guarantor on a lease application isn’t always the best decision to make. Before you dive in, eyes closed, there are things you should consider about the prospect.
Why People Co-sign
A cosigner on a loan is anyone with decent credit who agrees to take on the extra risk of covering the lease if the applicant fails to pay. In most cases, becoming a guarantor isn’t a very big issue, but it can be. Basically, if you sign, you are essentially granting a promissory note that says you will pay if your friend or loved one does not.
While this can be a scary proposition, some people find they actually have to cosign to help children, for example, get their own places. The reasons why a cosigner is needed can vary. In some cases, an apartment management company might deem the person’s credit is not good enough to pass. In others, as is often the case with children just leaving the nest, credit is nonexistent. In either case, a cosigner can mean the difference between the person landing a new apartment home or having to look elsewhere.
Things to Consider When Co-signing
Legal definitions aside, there are certain things to carefully weigh before agreeing to cosign on an apartment application. They include:
1. The person’s trustworthiness - Can you really trust the person you are considering cosigning for? While this is likely the case with a child, how about a friend? Do you believe they can and will pay the bills? If you don’t, forget signing. Remember, your responsibilities as a cosigner can include having to pay off the lease.
2. Your ability to help - Can you afford it? If something does happen, can you really afford to make a rent payment for someone else? If you can’t, be wary. It can pay to find out exactly how much of an obligation the agreement would put you in. You might find yourself having to “buy out” a lease or paying the full term.
3. Your future - What will it do to your credit? Cosigners often take hits in the form of obligations that show up on their credit reports. If your income to debt ratio is already maxed out, the act of signing might hurt you. Find out if apartment management reports cosigner activity to the credit bureaus.
Acting as a cosigner for a friend or loved one is a very big step. Taking it lightly can come back to haunt you in the end. Carefully weigh the option before agreeing to sign on the dotted line.
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