It’s tough to know what to do if a good friend or relative comes to you, begging you to co-sign a lease because her credit just didn’t make the cut. Before you add your name — and your credit — to the lease, it’s wise to know what you’re letting yourself in for. While you may be willing to add your name for a short time, signing for someone else doesn’t just go away when you’re tired of it.
Purpose of a Co-Signer
Someone who needs to find a co-signer is typically a person with questionable credit. It may be because of a history of late or defaulted payments, low income or a short time on the job. Whatever the reason, a co-signer puts up his credit and good name to reassure the property owner that he’ll get his money. If you’re the co-signer, that means that you are willing to stand behind the person you’re co-signing for and are guaranteeing that she’ll make all of her payments.
As a general rule, unlike so many things in life, co-signing is pretty much forever. In the case of a lease, this means that the co-signer is responsible for the lease for the duration of the agreement, whether it’s a six-month lease, a yearlong lease or for some other period. While you may be able to remove your name in some cases, it may not be easy and it requires the cooperation of the property owner to do it.
When you co-sign for someone, you become as responsible for the lease as she is. This means that if the main lessee defaults, the owner of the property can come after you for the payments, and he doesn’t have to go after the other party first. The owner is not required to exhaust all other avenues of collection before he can start bugging you, either; he’ll likely come straight to you as soon as a payment is missed, since you’re the one with the money.
Once you co-sign for a lease, you own the debt as much as the lessee does, even though you have no legal interest in the property. In a nutshell, what this means is that if the tenant defaults, you have to pay, but you don’t get to live there. How the payments are handled also affects you. While that’s great if the person you co-signed for behaves responsibly, if she is late or doesn’t make her payments at all it may negatively affect your credit.
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