Do Guarantors Have to Pay an Application Fee?
Are guarantors responsible for application fees? This guide clarifies when they might pay and how to understand your financial obligations.
When applying for a new apartment, securing a loan, or entering certain agreements, individuals may need a guarantor. This provides assurance to the landlord or lender, as the guarantor agrees to take on financial responsibility. A common question is whether guarantors are typically responsible for application fees. Understanding application fees and the guarantor’s role helps clarify these potential costs.
Defining a Guarantor and Application Fees
A guarantor is an individual who agrees to assume financial responsibility for another person’s debt or obligations if that person defaults. This role provides a safety net for landlords or lenders, ensuring payments are made even if the primary applicant faces financial difficulties. Guarantors typically do not reside in the property or directly benefit from the loan, distinguishing them from co-signers who may share occupancy or direct ownership.
Application fees are charges collected by landlords, lenders, or other entities when processing an application. These fees generally cover administrative costs associated with evaluating an applicant’s suitability. Common expenses covered by these fees include credit checks, background checks, and the time spent reviewing and verifying information provided in the application. This assessment helps determine the financial viability and reliability of the prospective tenant or borrower.
Typical Scenarios for Application Fees
Application fees are primarily directed toward the primary applicant, such as a prospective tenant or loan borrower. The purpose of these fees is to enable the landlord or lender to conduct a thorough screening process of that individual. This often involves obtaining their credit report, verifying their employment and income, and conducting criminal background checks.
The average cost for a rental application fee in the United States generally ranges from $25 to $75 per applicant. In some high-demand markets, these fees might extend to $100 or even $200. These fees are typically non-refundable, regardless of application approval or denial, as they compensate for the resources expended during the screening process.
When Guarantors May Be Asked to Pay
A guarantor may be asked to pay an application fee if the landlord or lending institution requires a separate screening process for them. This is not universally the case, but it depends on the specific policies of the entity assessing the application. If a landlord or lender conducts a credit check, background check, or income verification specifically for the guarantor, an associated fee may be charged.
This separate screening ensures the guarantor meets specific financial criteria, such as having a strong credit score and sufficient income to cover the obligation if needed. For instance, a guarantor might be required to earn 80 to 90 times the monthly rent in annual income, depending on the landlord’s requirements. The cost for a guarantor’s individual credit check and background screening can be similar to that of a primary applicant, typically falling within the $25 to $75 range.
Understanding Your Obligation
Prospective guarantors should carefully review all application documents and guarantor agreements before committing to the role. These documents outline specific financial responsibilities and the duration of liability. It is important to understand what the agreement commits you to, beyond the primary debt, which may include potential fees or damages.
Directly communicate with the landlord, lender, or application processor to clarify any fees specifically applicable to the guarantor. Policies regarding guarantor fees can vary significantly between entities and locations, making proactive inquiry essential. Asking about the exact circumstances under which you might be asked to pay and for how long your guarantee would be in effect can help prevent unexpected financial burdens.