On a mortgage, the guarantor is part of the mortgage process. Your guarantor will have to disclose his assets, income, and debts, as well as undergo a credit check. The mortgage company wants a guarantor that can pay for his own rent or mortgage and be able to assume yours if you default. More and more landlords are asking for guarantors on residential rentals. This is especially true in high cost of living areas like New York City. A landlord is going to want a guarantor who lives close and has a sufficient income to cover the rent payments if you default. [2] X Research source [3] X Research source On a credit card application, the card issuer is going to look at the guarantor’s income and credit rating. In short, the credit card will be in your name, but it will be granted on the strength of your guarantor’s credentials. Parents often act as guarantors on credit cards issued to applicants that are under 21. [4] X Research source
A co-signer also agrees to pay the loan if you default. On a mortgage, a co-signer will be listed as a joint owner of the property until the mortgage is paid off. On a credit card or money loan, the co-signer is liable for the debt, but can’t make charges. The main difference between a guarantor and a co-signer is that the lender must exhaust every possibility of collecting against you before they can sue a guarantor. A co-signer has less protection against liability and can be sued immediately. With a joint applicant, you can often pool your assets with another person, usually a spouse, partner, family member, or roommate to meet the requirements for the contract. A joint applicant is someone who will have the same rights as you as far as the property, rental, or charge account. In this type of agreement, the liability is usually equal. Both parties are responsible for the entire debt.
Keep your guarantor up to date on your financial condition. If you are beginning to struggle, it is critical that you be honest. You may need to move or ask for help with mortgage or credit card payments until you can get back on your feet. Be prepared to release your guarantor as soon as possible. When a new job starts paying off or old debts are paid, you will usually see your credit score and cash flow increase. On a credit card, it can often be as simple as a joint phone call. [5] X Research source On a mortgage or contract, it may require refinancing the agreement or rewriting the lease.
Anticipate his questions. What would you want to know if a family member was asking you to be his guarantor? Regardless of your personal relationship, this is a business deal. Be prepared for him to answer “no,” especially if you have a poor credit and financial history. In the long run, the personal relationship is more valuable than an apartment or credit card.
Commercial lease guarantors are an excellent resource for non-citizens coming to the United States for work or school. You may have considerable assets in your home country, but since suing you and your guarantor would be difficult, the landlord or mortgage company will want a domestic guarantor. If you are considering a commercial guarantor, ask for references in the form of landlords they have worked with. Contact the landlords and ask about their experiences with the guarantor. You can also check the Better Business Bureau for complaints. Check the default provisions carefully and what penalties you might face if your commercial guarantor has to pay off on your lease.
