Many people think their liability is for only one-half of the debt—not so. If you cosign a debt and the borrower doesn't pay, in most every case you will be responsible for the entire debt.
The lender may take legal action against you, pursue you through debt collection agencies, or sell the debt to a “debt buyer” to try to collect the money that is owed on the loan if the borrower does not pay or defaults on his or her repayment obligations.
Unfortunately, when you sign as a cosigner, you are agreeing to be on the hook for the tenant if they break the lease somehow and get evicted. And if she got evicted, she defaulted on the lease in some way.. you don't get evicted if all the tenants do what they are supposed to under the lease.
If a co-signer wants to leave a lease they need the agreement of the landlord. It has little to nothing to do with what the tenant does. Without the agreement of the landlord getting off the lease (for anyone, tenant or co-signer) simply isn't an option.
Your best option to get your name off a large cosigned loan is to have the person who's using the money refinance the loan without your name on the new loan. Another option is to help the borrower improve their credit history. You can ask the person using the money to make extra payments to pay off the loan faster.
A co-signer typically stays on a lease for the entire duration of the lease term, which is usually one year for most residential leases. However, the specific duration can vary depending on the terms of the lease agreement and the policies of the landlord or property management company.
No Guarantees – Although a cosigner accounts for the financial end of the agreement, they cannot guarantee tenant behavior. So, landlords may find themselves dealing with excessive noise, damage, or other questionable behavior.
Yes, you can sue your roommate for not paying rent since you and your roommate agreed to split the rent and they didn't live up to that promise.
The primary tenant can ask that the other person be removed from the lease renewal. Explain the situation and provide supporting documentation if requested. Be sure to indicate that you remain in the apartment and do want to renew the existing lease.
However, in certain legal circumstances, the cosigner may face jail time. For example, in a case where the co-signer helped to facilitate the defendant's flight, provided false contact information, or in any way assisted the defendant in evading prosecution.
IF YOU DO COSIGN
Be sure you can afford to pay the loan. If you are asked to pay and cannot, you could be sued or your credit rating could be damaged.
No. Cosigning a loan doesn't give you any title, ownership, or other rights to the property the loan is paying for. Your only role is to repay the loan if the main borrower falls behind on the payments or defaults.
Acting as a co-signer can have serious financial consequences. First, co-signers assume legal responsibility for a debt. So, if the primary borrower is unable to pay as agreed, the co-signer may have to pay the full amount of what's owed. Second, a co-signed loan will appear on the co-signer's credit reports.
A guarantor typically steps in only when you default on payments. A cosigner, on the other hand, is equally liable from the start–and even has the same legal rights to the space as you do. (If you're signing a lease with a roommate, they're technically considered a cosigner too.)
If a co-tenant wants to leave before the end of the lease period, they should notify the landlord and get their permission. Otherwise, the other co-tenants can try to replace them with a new tenant who meets the landlord's standards.
As explained above, landlords usually don't bother filing suit unless they can find the tenant, have some reason to think that they can actually collect if they win, and are confident that the tenant has no legal defense for failing to stay through the end of the lease.
So, if your co-applicant has an eviction on their record but you don't, it could potentially affect your rental application. Landlords often take into account the rental history of all applicants to ensure they're choosing reliable tenants.
However, if you've been evicted for non-payment of rent, the landlord will likely hire a collections company to pursue your debt. This collections account will appear on your credit report and hurt your credit score. If you have a cosigner or guarantor on your lease, the debt will appear on their credit report as well.
Remember that co-signing a lease is legally binding and may be difficult to get out of unless the tenant signs a new lease on their own, so you should feel confident about your choice before you sign.
Cosigning a lease has no direct effect on your credit score; however, if the rent doesn't get paid in full and on time – no matter who is to blame – you risk a black mark on your credit rating and you could expose yourself to a lawsuit as well. While we're on the topic, consider getting renters' insurance.
Removing your cosigner leaves just you to cover any late or missed monthly payments, so some lenders might make it difficult to remove the second person. Before you can remove a cosigner, you may have to prove that your finances and/or credit score have improved since getting the loan.
Although every rental management company evaluates broken leases differently, if you owe money to another rental company, most won't rent to you. However, if you've broken a lease and either don't owe money or previously owed money and paid it off, it's less likely to adversely affect your application.
Cons. No Nonsense Landlord points out that a cosigner does not help with risk based on a tenant's personal behavior, which is separate from financial risk. For example, having a cosigner isn't going to help with problems such as noise complaints, unneighborly behavior, or utility shutoff.