What's a Co-Signer?

What You Need to Know About Being a Co-Signer

Apartment hunting

Applying for your first apartment can be difficult and it may require a co-signer. This is a common scenario for young adults and something they often run into during those first years of college. 

Why Is a Co-Signer Needed?

Whether they are applying for a credit card, a car loan or an apartment lease, many young college students and 20-somethings need a co-signer or guarantor to qualify. Typically, it is one or both of their parents or their guardian.

Most students or recent graduates simply do not earn enough money or have enough of a credit history to make them good risks. Having a co-signer guarantees the loan or rental agreement and says, in essence, if my kid doesn't make the payments, I will. 

What Parents Should Tell Their Young Adults

Parents need to make clear with their young adults the guidelines and expectations they have for this agreement. Understanding the ramifications for the parent if the young adult should be negligent in making payments is important and should not be taken lightly by either one.  

Becoming responsible for his or her own credit and bills is a very important part of growing up for any young adult, whatever the financial situation may be. Educating your young adult about the perils and pitfalls of credit and not managing bills in a timely manner can save both your young adult and you a lot of headaches in the future, particularly if you are a co-signer.

In the age of a near-cashless society, keeping track of income and expenses on a daily basis is more important than ever.

The Benefits of a Co-Signer

The arrangement benefits the landlord, of course. They know that a responsible adult will help them and is also willing to cover any costs should the younger person choose not to.

Let's face it, kids do not have the best reputation for responsibility and landlords do have their business interests to protect.

The co-signer also benefits the young renter. Without the support, they may not qualify for the apartment. They do not have an established history and this is their first opportunity to build a solid foundation.

What to Expect as an Apartment Co-Signer

As a cosigner for an apartment rental, you will be expected to go through the same steps as the renter. Even though you will not be living there, you are sharing the responsibility and the landlord will want proof of your ability to back up the renter.

As a co-signer, you will likely have to:

  • Fill out a rental application.
  • Undergo a credit check.
  • Provide proof of employment.
  • Provide financial history.
  • Pay an application and/or credit check fee as well.

Each landlord will have different requirements for co-signers and not all of these background checks will apply in every situation.

What if Something Goes Wrong?

As the co-signer on an apartment, you are financially responsible for any damages or unpaid rent.

  • If your child moves out before the lease is up or falls behind on rent, the landlord can legally seek that money from you. 
  • If your college student has a raucous party that damages the rental and cannot pay the landlord, you may be responsible as well.

That first apartment is the first real test of responsibility that many young adults go through and it does not always go well. If you are co-signing for your kid's apartment, make sure that they know that their choices can reflect on you as well.

Be sure to remind them that you have worked hard for what you have. You also care about them and are willing to help them get a good start in life and with that comes responsibility. Most kids will take this to heart and do their best.

In the case that something does go wrong, don't panic or get too angry. Young people do make mistakes and it is important to remember that.

Your best approach may be to help them out now but make sure they understand that they are still responsible for their mistake.

That may mean paying you back over time or it could mean you will not co-sign the next time they need it.