Have you just found you perfect student accommodation only to be told that you need to pay up front? You’re not alone – most student accommodation providers in Ireland require the total rent to be paid in one lump sum up front for the entire duration of the contract – that’s typically over €10,000 for a standard 41 or 51 week contract which can be pretty damn hard to pay up front!
So you want to pay monthly? Sounds like a reasonable request but unfortunately it can be complicated and expensive. In order to pay monthly, some student accommodation residences require you to sign up to a guarantor service. Let’s examine exactly what this means below:
What is a Guarantor?
A guarantor is a person who contractually agrees to pay your rent if you’re unable to pay. This guarantor must demonstrate that they are eligible and provide documentation regarding their proof of income etc.
Who can be a rent guarantor?
According to Housing hand, a rent guarantor service, each guarantor must:
- Be aged between 18 and 75 years old
- Be able to demonstrate a positive credit history
- Be able to pay your rent should they need to do so
- Be an Irish resident
Wait a minute…did you say the rent guarantor must be Irish?
Apparently so, Housing hand require your rent guarantor to be an Irish resident. Legal proceedings can be initiated if a guarantor fails to pay so legal jurisdiction in Ireland is important for a company offering a rent guarantor service. This is extremely challenging for international students.
What documentation must a rent guarantor provide?
Your guarantor will need to demonstrate that they’re in a financial position to pay your rent. They’ll need to provide proof of income, identification and sign a legally binding contract in order to be your guarantor.
How much does a rent guarantor service cost?
The short answer is that it’s expensive! Very expensive actually. Unfortunately only housing hand (based in the UK) offers a student rent guarantor in Ireland which means there is no competition. This lack of competition appears to have resulted in very high prices – lets look at an example below:
Chloe wishes to move in to a student accommodation in Ireland for 6 months (let’s say 25 weeks) – the room she likes costs €250 per week. Unfortunately, Chloe only gets paid monthly and she’s therefore not in a position to pay the student residence €6,250 (25 weeks x €250 per week). So she decides to get a quote form a student rent guarantor company in order to enable her to pay monthly – how much is this likely to cost?
Based on our research, the likely quote from a student rent guarantor service for this 25-week contract is a one-time payment of approximately €485. You might be an international student moving to Dublin and quotes like this are hard to analyze, especially when there’s very little competition in the market so you can’t shop around. Our team at Studenthouse.com is based in Dublin – we like to think we understand the market so what do we think?!?
To put it simply, we think €485 is extremely expensive – some might even say it’s a rip off.
So why is €485 expensive? Well we look at this as essentially a form of finance. You’re paying a company to assume responsibility of a financial obligation on your behalf – it’s really a loan. Instead of providing an underlying asset as collateral (as you would do with a loan), you’re providing your guarantor as collateral. The guarantor company has recourse against the person who guarantees the student accommodation rental payments.
Lets get the calculator out and have a closer look.
Ok so if this is essentially a loan, then what’s the finance charge? Well the interest rate would be €485/6,250 which equals 7.76% however this is only a loan for 25 weeks so the effective APR (Annual percentage rate) for this loan would be 16.14% – now that’s expensive. To put that in context, Bank of Ireland offers student loans with an APR from just 5%.
Rent guarantors may be expensive but do you have a choice?
Yes, you do. Contact us at www.co-live.com to learn how we can help. We offer monthly payment plans at much lower rates for students who book with Studenthouse. We also work with some student accommodation providers who provide multi-instalment plans and monthly payments directly which offers great payment flexibility.
We’re always interested to hear your thoughts so feel free to reach out at firstname.lastname@example.org