A guarantor is a person or entity that commits to covering the cost of a loan or lease agreement if a loanee or renter defaults. This can help lenders, landlords, rental [property management](https://www.masterclass.com/articles/how-to-become-a-property-manager) companies, and subsidiaries feel more confident closing a deal with someone who might have red flags on their application. It can also cut down on the risk of eviction for [renters](https://www.masterclass.com/articles/renting-vs-buying-explained) and their roommates.

Guarantors can sign limited or unlimited agreements. In a limited agreement, the guarantor might only be on the hook for a certain amount of money or for a certain duration of time if a loanee or renter defaults. They might be able to shield certain assets from seizure should they also default in paying the required sums of money. In an unlimited agreement, the guarantor must pay the entire sum of money the defaulted borrower owes; their assets are at risk of seizure as collateral if they don’t.
Guarantors can do a lot to help build confidence in otherwise less-than-ideal rental and loan applications. Here are just three reasons a loanee or renter might consider securing a guarantor:

1. __Low annual income__: Many landlords want <a href='https://masterclass.com/articles/baking-101-what-is-proofing-learn-how-to-proof-breads-and-other-baked-goods' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://masterclass.com/articles/baking-101-what-is-proofing-learn-how-to-proof-breads-and-other-baked-goods","linkCopy":"proof","category":"automated-link"}' automatic='true'>proof</a> you can handle the burden of annual [rent costs](https://www.masterclass.com/articles/how-does-rent-to-own-work) and then some, and they’ll want written documentation to prove it. For instance, in New York City, landlords want your annual income to be at least forty times your monthly rent amount. Providing proof of income through pay stubs or bank statements is common, and you can supplement these with a guarantor’s income to assure landlords one or both of you will be able to make months of rent payments.
2. __No rental history__: First-time renters (such as college students) often don’t have prior rental histories. Landlords prefer renters who have documented pasts as reliable tenants to show they are capable of making prompt payments and will leave their rental spaces in good shape. Guarantors can step in to boost confidence that new renters will be able to fulfill the terms of their lease agreements. If, for whatever reason, they default on their payments or cause extensive property damage beyond their means to repair, the guarantor commits to covering the costs.
3. __Poor credit history__: A bad credit check can sink a loan or lease application. There are a lot of understandable reasons your credit score might suffer: your credit card balances could be too high, you might have missed a payment by accident, or you might have had too little time to build up good credit. A guarantor can help mitigate a low credit score with their own if theirs is higher.
Both lease guarantors and cosigners commit to repayment should renters, lessees, or loanees default on payments, but there’s one key difference. Guarantors only need to pay after the borrower or renter defaults—in other words, their own credit and assets won’t be on the hook until after another person has defaulted themselves. Cosigners, on the other hand, are immediately liable—if the person they cosign with defaults, it will reflect poorly on the cosigner’s credit, and they will be instantly accountable for covering all costs.
Guarantors help people secure new apartments or loans to which they wouldn’t otherwise have access. Here are three requirements guarantors must meet:

1. __Good credit history__: A guarantor needs to be confident their own credit report will come back with good marks. This allows people to rely on them for better interest rates on loans or greater access to rental properties. An extensive, high-ranking credit history goes a long way in ensuring lenders and landlords that you’ll be capable of stepping in should the actual borrower default.
2. __Stable income__: A guarantor guarantees they will take on financial responsibility for monthly rent or other payments should another person default. This means they need a middle-range to high-range income to help the person initially qualify for a lease agreement and to swallow any costs if the same person defaults.
3. __Willingness to shoulder debt__: If a borrower defaults, the guarantor services all the debts covered in their lease or loan contract. This is a lot of responsibility and requires commitment, reliability, and trust on both ends. This is one of the main reasons people turn to close friends, family members, or reliable third-party guarantor services to act as their guarantors.
You might consider subletting a rental property if you cannot secure a person or service to be your guarantor. Under the terms of the sublease agreement, the subletter makes monthly rent payments to the sublessor, who pays rent to the landlord according to their original lease. Other options include negotiating with your landlord for higher rent payments or paying an additional security deposit to secure a rental property. Communicate your situation with brokers and landlords to find a property that will work for you.
*All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.*
All you need is a [MasterClass Annual Membership](https://www.masterclass.com) and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market. 
By using a guarantor, you can shore up your rental application process upfront. Learn more about what guarantors can do to help borrowers qualify for real estate rental agreements and other transactions.

By using a guarantor, you can shore up your rental application process upfront. Learn more about what guarantors can do to help borrowers qualify for real estate rental agreements and other transactions.

What Is a Guarantor? 3 Reasons to Use a Guarantor on a Lease

A guarantor is a person or entity that commits to covering the cost of a loan or lease agreement if a loanee or renter defaults. This can help lenders, landlords, rental <a href='https://www.masterclass.com/articles/how-to-become-a-property-manager' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/how-to-become-a-property-manager","linkCopy":"property management","category":null}'>property management</a> companies, and subsidiaries feel more confident closing a deal with someone who might have red flags on their application. It can also cut down on the risk of eviction for <a href='https://www.masterclass.com/articles/renting-vs-buying-explained' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/renting-vs-buying-explained","linkCopy":"renters","category":null}'>renters</a> and their roommates.Guarantors can sign limited or unlimited agreements. In a limited agreement, the guarantor might only be on the hook for a certain amount of money or for a certain duration of time if a loanee or renter defaults. They might be able to shield certain assets from seizure should they also default in paying the required sums of money. In an unlimited agreement, the guarantor must pay the entire sum of money the defaulted borrower owes; their assets are at risk of seizure as collateral if they don’t.

What Is a Guarantor?

Guarantors can do a lot to help build confidence in otherwise less-than-ideal rental and loan applications. Here are just three reasons a loanee or renter might consider securing a guarantor:<ol class="mc-m-4"><li class="mc-my-4"> 1. Low annual income: Many landlords want <a href='https://masterclass.com/articles/baking-101-what-is-proofing-learn-how-to-proof-breads-and-other-baked-goods' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://masterclass.com/articles/baking-101-what-is-proofing-learn-how-to-proof-breads-and-other-baked-goods","linkCopy":"proof","category":"automated-link"}' automatic='true'>proof</a> you can handle the burden of annual <a href='https://www.masterclass.com/articles/how-does-rent-to-own-work' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/how-does-rent-to-own-work","linkCopy":"rent costs","category":null}'>rent costs</a> and then some, and they’ll want written documentation to prove it. For instance, in New York City, landlords want your annual income to be at least forty times your monthly rent amount. Providing proof of income through pay stubs or bank statements is common, and you can supplement these with a guarantor’s income to assure landlords one or both of you will be able to make months of rent payments. </li><li class="mc-my-4"> 2. No rental history: First-time renters (such as college students) often don’t have prior rental histories. Landlords prefer renters who have documented pasts as reliable tenants to show they are capable of making prompt payments and will leave their rental spaces in good shape. Guarantors can step in to boost confidence that new renters will be able to fulfill the terms of their lease agreements. If, for whatever reason, they default on their payments or cause extensive property damage beyond their means to repair, the guarantor commits to covering the costs. </li><li class="mc-my-4"> 3. Poor credit history: A bad credit check can sink a loan or lease application. There are a lot of understandable reasons your credit score might suffer: your credit card balances could be too high, you might have missed a payment by accident, or you might have had too little time to build up good credit. A guarantor can help mitigate a low credit score with their own if theirs is higher. </li></ol>

3 Reasons You Might Need a Guarantor

Both lease guarantors and cosigners commit to repayment should renters, lessees, or loanees default on payments, but there’s one key difference. Guarantors only need to pay after the borrower or renter defaults—in other words, their own credit and assets won’t be on the hook until after another person has defaulted themselves. Cosigners, on the other hand, are immediately liable—if the person they cosign with defaults, it will reflect poorly on the cosigner’s credit, and they will be instantly accountable for covering all costs.

Guarantor vs. Cosigner: What’s the Difference

Guarantors help people secure new apartments or loans to which they wouldn’t otherwise have access. Here are three requirements guarantors must meet:<ol class="mc-m-4"><li class="mc-my-4"> 1. Good credit history: A guarantor needs to be confident their own credit report will come back with good marks. This allows people to rely on them for better interest rates on loans or greater access to rental properties. An extensive, high-ranking credit history goes a long way in ensuring lenders and landlords that you’ll be capable of stepping in should the actual borrower default. </li><li class="mc-my-4"> 2. Stable income: A guarantor guarantees they will take on financial responsibility for monthly rent or other payments should another person default. This means they need a middle-range to high-range income to help the person initially qualify for a lease agreement and to swallow any costs if the same person defaults. </li><li class="mc-my-4"> 3. Willingness to shoulder debt: If a borrower defaults, the guarantor services all the debts covered in their lease or loan contract. This is a lot of responsibility and requires commitment, reliability, and trust on both ends. This is one of the main reasons people turn to close friends, family members, or reliable third-party guarantor services to act as their guarantors. </li></ol>

3 Requirements to Be a Guarantor

You might consider subletting a rental property if you cannot secure a person or service to be your guarantor. Under the terms of the sublease agreement, the subletter makes monthly rent payments to the sublessor, who pays rent to the landlord according to their original lease. Other options include negotiating with your landlord for higher rent payments or paying an additional security deposit to secure a rental property. Communicate your situation with brokers and landlords to find a property that will work for you.

What If You Don’t Have a Guarantor?

All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.

A Note on Real Estate Investment

All you need is a <a href='https://www.masterclass.com' target='_self' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com","linkCopy":"MasterClass Annual Membership","category":null}'>MasterClass Annual Membership</a> and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market.

Ready to Learn the Ins and Outs of the American Housing Market? 

By using a guarantor, you can shore up your rental application process upfront. Learn more about what guarantors can do to help borrowers qualify for real estate rental agreements and other transactions.

By using a guarantor, you can shore up your rental application process upfront. Learn more about what guarantors can do to help borrowers qualify for real estate rental agreements and other transactions.
