Many people have probably never heard of a cosigner service. For most renters, if their application gets denied, they just move on to the next. However, there’s a way for you to get your dream apartment even when you don’t have the credit standing to get approved. The sole purpose of a cosigner service is to get you qualified for a rental or a home when you otherwise can’t. It’s a great notion and opportunity for those who are having difficulty getting keys for a place to live; but before you jump into a contract with a cosigner service, you should first understand how they work and weigh the pros and cons.
How a Cosigning Service Works
When you get a cosigner for anything, the cosigner becomes responsible for payments in the event that you can no longer make the payments yourself. The idea is basically the same when it comes to a cosigner service for rentals and homes. The service will work like a lease guarantee program. When you can’t pay for your lease, the cosigner service becomes responsible for paying your landlord whatever is due. That sounds amazing, but you should know that a service like that doesn’t come for free.
In order to acquire a cosigning service, you’ll need to submit an application. Whether you’ve already been declined for a rental or are just in the initial stages of trying to find a place, it’s a good idea to submit an application for a cosigner service if you already know you’re going to need it or if you’ve already decided that you will use one. There’s generally a fee associated with cosigner service applications, and those could run anywhere between $50 to $125 or even more.
You should halt any rental hunts until you’ve received notification of your approval. Once you’ve been approved, you can look for your next apartment knowing that you have a better chance of getting any place you like. You’ll have a certificate from the cosigner service to show a landlord or an apartment complex; this certificate will show the amount that the cosigner service guarantees as well as how long this guarantee lasts. When you find a place you want to apply for, all you’ll need to do is submit the certificate along with your rental application and all other paperwork. If you get approved for the rental, you’ll just have to make your monthly payments as required by your new lease agreement.
The Cost of a Cosigning Service
In addition to the cost of application, there are other costs associated with using a cosigning service. You should know off the bat that it’s not cheap. After all, they’re guaranteeing lease payments for you when you can’t pay. It gets you out of immediate trouble. Different companies charge fees differently. There are cosigning services that will only charge you a one-time fee that you pay upfront. Majority of the time, companies will charge you 10% of the total amount of rent for an entire year. While this may be the cheaper option, not all homebuyers have a lump sum of money to give up. In this situation, some cosigner companies will give you the option to pay for costs monthly. This will end up costing you anywhere from 75% to 110% of the monthly rental payment.
Risks to Consider
Apart from the fact that it can get very expensive, there are other risks associated with using a cosigner service. The first risk is financial in nature as well. Most of the time, the upfront fees you give are nonrefundable—whether you get approval for an apartment or not. Some companies will refund you the initial costs if you don’t get into a place, but this is not the case majority of the time. In addition, most cosigning services will only guarantee your lease for 3 to 6 months. This is not something that many rentals like to see, so you should always be prepared for contingencies.
To Use or Not to Use
The final decision will ultimately be up to you and your level of need. If you can afford to pay for the service and are willing to accept the risks associated, using a cosigner service can be incredibly helpful. However, if you believe that the costs will prove to be more of a burden than anything, then a cosigner service might not be the best idea. You might be better off putting your extra money towards improving your credit score, so eventually, you can get the home of your dreams without having to deal with a cosigning service.