What’s the difference between a co-signer and a guarantor?

What Is a Co-signer?

A co-signer is equally as liable for a loan as a primary borrower. An individual co-signs a loan when the primary borrower is not financially strong enough to qualify for a loan on his/her own. The lender reviews both the signer and co-signer’s financial statements and credit reports to calculate the debt-to-income ratio. The idea is that the added income of the co-signer will strengthen the debt-to-income ratio so the primary borrower qualifies for the loan.


Requirements for an Apartment Co-Signer

In most cases, guarantors need to make between 80 to 100 times your monthly rent amount. This significant income requirement is due to the fact that the guarantor will be liable to cover your rent if you're unable to. When seeking the right person to become your guarantor, ensure they understand the terms of the guarantor agreement first.

Benefits With a Co-signer

A co-signer is beneficial in that the extra income allows a borrower to get a loan for which he otherwise wouldn’t qualify. This can allow the borrower the opportunity to purchase a home, buy a car or consolidate debt. Having a guarantor on the loan provides the exact same benefit. In the case of a business, a guarantor can help get a loan that will start or expand the company or increase its working capital position.

What If My Mortgage Payments Fall Behind?

If you hit a bump and fall behind on mortgage payments, several things could occur:

  • Your lender extends your loan-repayment schedule
  • Your lender asks your guarantor to cover the missed payment
  • You incur a fee
  • If you miss several payments, your lender could withdraw money from the savings account that holds the guarantor’s lump-sum deposit—if such an account was established
  • Last resort would be the lender repossessing your home—and, in some cases, your guarantor’s home as well, for full debt recovery

Are There Any Alternative Options to Co-signers and Guarantors?

Yes! If you prefer not to use a co-signer or guarantor, there are a few options you can consider. Depending on your state and local laws, you may be able to charge more for a security deposit. The additional charge offers added security if the tenant doesn't pay their rent. Some states have no limit on how much you can collect, while others may only allow one month's rent.

You may be able to charge more than the first and last month's rent to protect yourself from any rent gaps. Again, check your local laws and regulations to make sure you're compliant.

You may avoid the need for a guarantor by switching to a month-to-month lease arrangement. These leases renew automatically unless the agreed-upon notice is given. Security deposits can also be collected on a month-to-month lease, giving landlords added protection against tenants who don't pay.

What is a Guarantor for a Mortgage?

Like a co-borrower, a guarantor should have a strong credit history and income and asset levels to help you close on a mortgage your individual financial profile might fail to qualify you for.

However, unlike a co-borrower, a guarantor does not pay monthly mortgage payments.

That’s your responsibility.

In addition, a guarantor’s name won’t be on your deed.

A guarantor swoops in to cover mortgage payments if you temporarily fall behind or to help the lender absorb the financial hit if you default, but only once the bank has exhausted every avenue with the borrower.

But…you don’t want to fall behind or default.

Another mortgage-lender safety net for defaults is having the guarantor put a one-time lump sum into an interest-bearing savings account set up by the lender.

When the loan value of the mortgage decreases (usually to around 80%), the bank will release the guarantor from the loan agreement—and refund the money.

A guarantor gives a lender peace of mind about extending a mortgage to you.

Your guarantor is the fiscal security blanket that lets your lender sleep at night.

Find out how a guarantor can help you rent by reading What is a Guarantor for a Rental Apartment?

Be Prepared To Ask These Questions

Guarantor vs. co-signer, no matter whom you go with, don’t hesitate to ask these questions.

  • Do you have a good credit score?
  • Do you have a good source of income?
  • Will you be able to pay my rent if I fail to do so?

How hard is it to get a lease guarantee contract approved?

While your credit and income will be verified, they may be able to offer approval to those with a lower income than what the rental company requires. For example, many property management companies may require the applicant to make as much as 40X or more of the annual rent. So if your rent would be $2000 per month, you’d need to make a minimum of $80,000 to qualify. Some rent guarantee services will co-sign for you if you make less. For example, Insurent requires 27.5X times the rent or $55,000 using our example. If you cannot qualify for the lease on your own, it is worth seeing if a lease guarantee company can help you.

How do I apply for lease guarantor services?

In some cases, your future landlord will provide the service with your application details. In other cases, you will need to provide typical information such as ID, proof of income, and employment information. You can apply online and expect a response usually within 24 hours.

Are There Any Downsides to Having Co-signers or Guarantors on a Lease?

Co-signers and guarantors offer ample financial protection, but there's more to it than collecting missed rent. Despite all of the pros to having a co-signer or guarantor on your next lease, there are downsides to consider.

Landlords need to run a credit report and background check for a co-signer who will be living on the premises. Landlords also need to require bank statements and the same financial statements required of a tenant. Although you can charge a fee for these reports, it adds another layer of administrative work and research to fill the unit.

If your tenant fails to meet their financial obligation for rent, you will need to contact the co-signer or guarantor to request payment. They are legally required to pay up as outlined in your lease, but that doesn't mean there may not be issues collecting on the rent through a third party.

Car Loan FAQs

Do I Need a Co-Signer for a Car Loan?

No, you do not. However, a co-signer can be a huge help for those who aren’t strong candidates for an auto loan. If you have a lower credit score, if you are a first-time buyer, or if you have low income, then a co-signer can help you get a much better deal.

Does a Co-Signer Own the Car?

The co-signer is a partner in financing, but not ownership. They cannot take possession of your vehicle, even if they start making the payments themselves. That’s because their name is not usually on the title, and only the titleholder owns the vehicle.

Do I Need a Guarantor for Car Finance?

No, you do not. But like the co-signer, a guarantor strengthens your case to lenders if you are not a strong candidate for a car loan.

Who is Eligible to Be a Guarantor?

Almost anyone can become a guarantor who is over 21 years of age in good financial standing. You can ask a family member, a friend, or a spouse with a separate bank account. The important thing is that your guarantor is someone who you trust with a record of good financial stability.

What Do I Need to Co-sign a Car?

Any co-signer for a car will need the following:

  • A strong credit score: ideally at 700 or above.
  • The ability to make payments: lenders will look at the co-signer’s income to ensure they are able to step in and make payments for the car should the owner fail to do so. Pay stubs or tax returns are helpful documents here.
  • Proof of stability: some lenders may ask to see proof of residency or job security to help verify their standing, but this isn’t always necessary, especially with a good credit score.

Who Can Co-sign a Car for You?

Anyone you trust can co-sign a a car for you, though people typically choose a family member or loved one. Regardless of your relation, the person you choose should have a solid credit history with a score of 700 or higher in order to help secure your loan.

Is a Co-signer on the Title of a Vehicle?

Your co-signer does not need to be on the title of your new vehicle unless you decide to add them. Ultimately, co-signing is related to financing the vehicle, not owning it, so unless you specifically ask for them to be added, their name will not appear on the title.

What is a Co-applicant vs. Co-signer Auto Loan?

The difference between a co-applicant and a co-signer is ownership. A co-applicant is a second owner with equal rights to the vehicle as the first owner. An example of this would be a married couple applying for vehicle together. A co-signer is not an owner and has no rights to the vehicle once financing is secured.

Difference Between Guarantor Vs. Co-Signer

Who are they?

A person or third-party company

A person (parent or roommate)

Rent obligations

Pays the rent only when the tenant fails to pay

Pays the rent monthly by splitting rent with the tenant

Annual Income (including liquid assets)

40-80 times the monthly rent

70-80 times the monthly rent

Can they live in the rented property with you?



Risk of eviction from failing to pay rent



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