What Are the Dangers of Cosigning an Apartment Lease?

Cosigning a lease could help or hurt in ways that many people may never think of. While most people are aware that there is a danger if the primary person on the lease does not fulfill his obligations, there are also other dangers. Even if the primary renter is trustworthy and meets all payments on time, there are ways that cosigning could adversely impact the person attaching her name and credit to the lease.

Default Liability

The biggest danger to cosigning an apartment lease is that the person cosigning is responsible for all payments associated with that lease should the other individual default. In other words, you may be helping a friend of family member essentially live rent free in order to protect your own credit. If you decide to let the lease continue in default, then your credit, along with the primary leaseholder's credit, could be affected.

Damage Liability

While default is the primary thing many think about, anyone signing a lease is subjected to the terms of that lease. Therefore, a cosigner may also be responsible for any damage that results from those living at, or visiting, the apartment. While the renter may forfeit the damage deposit, any additional amount owed from sustained damage could be chargeable to the cosigner, as well as anyone else on the lease.

Debt to Income

Even if the apartment stays relatively unscathed and the primary person on the lease meets all stated obligations, the situation could reflect poorly on a cosigner's credit report. The fact that the cosigner is obligated for a rent payment in the event the primary renter cannot pay is something creditors will look at. Cosigning will count against the cosigner's debt-to-income ratio and therefore could be detrimental should that person seek out another loan while the lease is in effect.

Asset Risks

Although not extremely common, a leasing agent may require some type of collateral from the cosigner should the rent go into default. Therefore, a cosigner risks the loss of any property put up as collateral. In addition, if the cosigner cannot pay a default, it may be necessary for that person to voluntarily sell assets in order to protect her credit.

Friendship

Although monetary damages may be the most commonly mentioned dangers of cosigning an apartment lease, those are not the only considerations. If the primary applicant is not able to meet the terms, that could lead to resentment on the part of the cosigner. Therefore, a cosigner must ask how much she can trust the individual, whether she will feel ill toward that person if he cannot meet the terms, and how that might affect the friendship.

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