Parents Risk Being Guarantor for Rent
11th July 2017
If you have a child going to university or moving out for the first time, you may be asking yourself the question, what are the parents risks being guarantor for rent? The fact that you are asking this question suggests you are already sensible to be cautious of the potential financial burden you are committing to. If you are considering being a rent guarantor for someone, you should read on to make sure you understand exactly what you are getting yourself into.
WHAT IS A RENT GUARANTOR?
Before you sign anything, you should be fully aware of what your role in the contract is, and to do so, you will need to know what a guarantor is. In short, a rent guarantor is someone who signs the contract alongside the tenant and in doing so agrees to pay rent, damages and any other outstanding bills for the duration of the tenancy if the tenant cannot pay themselves. For more information on what a rent guarantor is, why they are required and who can and cannot be a guarantor, please read our dedicated ‘What is a guarantor’ explainer article.
WHAT ARE THE RISKS FOR PARENTS WHEN BEING A GUARANTOR?
Initially, the risks of being a guarantor appear to rely on how much you trust the tenant you are guaranteeing. This is the case with some tenancy agreements, but parents should be warned that most student or shared tenancy letting agreements use a ‘Joint and Several Liability’ contract.
This may sound a bit scary or complicated, but again, it is quite simple. A Joint and Several Liability contract means that everyone on the contract is liable to cover any missed payments of rent. Importantly, this means not only the tenants but their guarantors, i.e. you, are jointly liable to pay missing rent and all other tenancy related obligations such as damages, cleaning costs or outstanding bills. This can be a worry for parents who have never met their child’s flatmates.
WHAT CAN PARENTS DO TO REDUCE THE RISK OF BEING A RENT GUARANTOR?
For many parents, the financial danger of being a guarantor is a large worry and can often be the cause of lots of stress. Parents can feel they have no other option despite the obvious hazards involved, especially if a child’s flatmates are able to provide guarantors who aren’t as concerned about the risk. An obvious option to consider is guarantor protection. Only My Share is the sister service of Housing Hand for tenants that can provide a qualifying rent guarantor and decide to financially protect themselves and their guarantors against the risk of paying other tenants’ missed rent. For just £99 both the tenant and their guarantor can be covered against up to £10,000 worth of rental arrears.
DON’T TAKE THE RISK OF BEING A GUARANTOR!
If you have read all this and decided that you want to do something to reduce the risk of being a guarantor, have you considered not being one? With Housing Hand’s Rent Guarantor Service you can offset the risk. How it works is that should any of the tenants in a joint and several contract fail to pay their rent, Housing Hand would pay on their behalf and attempt to contact them to arrange a suitable repayment plan. If we are unable to make contact, or should the agreement be broken, we then contact the cosigner to pay what the tenant owes. This way the tenants are able to pay us back for any outstanding fees, as opposed to mounting debt with a personal guarantor (such as yourself) or being required to take out short term loans to cover outstanding fees.
WHAT IF I CANNOT BE A GUARANTOR DUE TO POOR CREDIT HISTORY OR NOT BEING A UK RESIDENT?
As long as you have an income, you can stand as a cosigner, allowing Housing Hand to stand as the guarantor for your child. Your credit history is not relevant and if you are from overseas, that is not a problem either, as a cosigner does not need to be based in the UK, so can be a parent or friend from outside the UK.
GIVE US A CALL!
If you are unsure of any of the risks of being a guarantor or would like to discuss how you can use Housing Hand Guarantor Service to reduce the risk, please don’t hesitate to call on +44(0)207 2052625 or email us at [email protected].