You may be familiar with the phrase “guarantor” if you’ve ever dabbled in the rental market. But what is a guarantor for rent, and how does having one impact your rental journey?
We’ll explain the role and responsibilities of a rent guarantor and discuss how they can help secure a rental property in Australia in this article. In addition, remember to read up on your tenants’ rights in NSW or which ever state you’re living in to stay informed.
What is a guarantor for rent?
A guarantor for rent is a person or organisation that agrees to take financial responsibility for a prospective tenant if they fail to meet them. Such a guarantor requires a certain fee from the renter before taking up the responsibility, but that is not always the case. Let’s dig deeper to find out more about this.
Who can be a guarantor for rent?
When seeking a guarantor, you have several options:
Family members
A family member is often the first choice for prospective tenants because they usually find someone willing to stand in for them. The close relationship and willingness to take financial responsibility play a huge role when choosing a guarantor.
Friends or colleagues
Friends with a solid foundation of trust and financial stability can vouch for your ability to meet rental obligations, especially if you work together.
Organisations
For those who are having trouble finding a guarantor, social agencies for low-income earners or a private rental agency can act as one and provide support.
Responsibilities of a rent guarantor
There are a few crucial obligations for guarantors to remember:
Covering missed rental payments
The primary duty of a guarantor is to intervene if the tenant violates the terms of the rental agreement regarding payment of rent. Along with that, they utilise the direct debit payment mechanism to deduct rent directly
Paying for property damages
Guarantors should cover costs over regular wear and tear and adhere to the rules outlined in the lease.
Legal obligations
Entering into a guarantor agreement is a must for a guarantor as well as staying committed throughout the lease term.
Qualifications for becoming a rent guarantor
To be an eligible guarantor, you must meet specific criteria:
Good credit history
You must demonstrate financial trustworthiness by providing proof of your credit history. Also, be ready to ensure that regular payments are made on time.
Stable income
A guarantor must demonstrate their financial standing and have a steady net income sufficient to cover the tenant’s obligations.
Australian residency
In order to serve as a guarantor in Australia, one must demonstrate their legal capacity there and make contact with property management simple.
How to provide evidence as a guarantor
As a guarantor, you’ll need to present various documents:
Proof of income
You must show that you are financially stable by providing pay slips, bank statements, or other financial documents.
Credit report
A guarantor must have a clean credit history reflecting responsible financial behaviour. This helps assure landlords and property managers of your trustworthiness.
Proof of residency
To demonstrate that you are an Australian resident and to comply with the property manager proof criteria, you must present documentation issued by the Australian government.
Benefits of having a guarantor for first-time renters
Having a guarantor can significantly improve your rental experience:
Increased chances of rental approval
Guarantors provide support for applicants with limited rental history as well as assurance for property managers and landlords. So, if you’re wondering how to score a rental with no rental history, or renting a home with bad credit history, a guarantor comes in handy here.
Potential for lower security deposits
Another benefit of having a guarantor is reduced upfront costs for tenants. They also signify financial stability and reliability.
Peace of mind for tenants and landlords
Guarantors provide a reliable support system in case of tenant default and reduce the risk of rent arrears and property damage. For first-timers, this is what you should put on the rental application if you’re living with your parents—it’s reassuring for the landlord.
Responsibilities of tenants with guarantors
As a tenant with a guarantor, you should be aware of your responsibilities:
Timely rental payments
You should consistently pay rent on time to avoid burdening your guarantor. Additionally, you should use a direct debit system to automate payments.
Maintaining good communication
Keep your guarantor informed of any changes in your rental situation and notify them of any difficulties in meeting rental obligations.
Respecting the rental property
Last but not least, a tenant should avoid unnecessary repairs and expenses by exercising caution around the property and respecting the guidelines of the leasing agreement.
More on guarantors for rent
Can a guarantor stop being a guarantor?
A guarantor generally cannot stop being a guarantor until the lease ends or is renegotiated. Before agreeing to be a guarantor, it is crucial to fully grasp the obligations and dangers associated.
Can a guarantor be used for multiple rental properties?
A guarantor can be used for multiple rental properties, but it’s important to remember that their financial responsibility increases with each added lease. Guarantors should consider their financial capacity before agreeing to support multiple tenants.
How does a guarantor’s credit score affect the rental application?
A guarantor’s credit score plays a crucial role in a rental application, as it demonstrates their financial stability and ability to cover the tenant’s obligations if needed. A good credit score increases the chances of a successful rental application.
