Rent without guarantee: Learn more about how it works

Is it worth opting for renting without a guarantee?

This is a very common question among tenants, especially when it comes to security. After all, the vast majority of property rental processes require the presentation of some kind of rental guarantee in the rental agreement .

At first, this option may seem unsafe for owners. However, it ends up making up for it by bringing other benefits that should be carefully considered when making this choice.

For example, renting without a guarantee is an excellent advantage for those looking for greater ease and agility in renting properties. After all, the less bureaucracy this agreement involves, the more attractive it will be for the tenant.

Furthermore, if the tenant does not pay the rent within the agreed period, the eviction will occur much more quickly. This is a huge benefit for landlords, since they usually wait a long time for this approval in rental contracts with guarantees.

Contrary to what many people think, owners who opt for this model do not suffer any kind of financial loss! In practice, the opposite happens: they provide the same security through additional benefits provided by this type of rental.

Are you curious? Then come and learn more about its features, how it works and all its advantages! See the topics that will be covered:

• How does renting without guarantee work?
• What are the advantages and disadvantages of renting without a guarantee?
• Is renting without guarantee a common model?
• What to pay attention to when renting without a guarantee?

Let's get started!

How does renting without guarantee work?

Rent without guarantee, as its name suggests, is a property rental model that does not require the use of a rental guarantee.

In this case, the rental agreement can be signed without the presence of a guarantor, security deposit, insurance bond , or any other type of guarantee. This option is permitted by the Tenant Law, which is largely responsible for determining the rules for renting properties in the country.

When hearing this definition, many believe that renting without a guarantee is a model that does not provide any financial security to the owner. But this is not true!

To ensure that the landlord is not harmed, this model requires advance payment corresponding to a rental amount. Thus, in cases of early departure, the owner will not be financially harmed.

Therefore, there are two possible forms of payment provided for in our legislation. They are: prepaid or postpaid lease. The main difference between them is the deadline for this payment to be made. It can be before or after the tenant moves in.

Come and understand more about each of these options:

Rental without prepaid guarantee

In this first option of renting without guarantee, the tenant must pay the necessary amount before moving into the property. It is one of the safest options for the owner, since they will receive the money in advance.

However, the tenant also benefits from the prepaid rental without a guarantee . After all, they won't have to worry about paying this amount later, as they can deposit the required amount right at the beginning.

Even though it is advantageous for both parties, it is not a very popular option in the country. Therefore, it must be very clear between those involved if it is chosen. This way, no one will have any doubts about what was agreed and the consequent waiver of another guarantee when signing the contract.

Lease without post-paid guarantee

The lease without post-paid guarantee works in the opposite way to the previous one. Here, the tenant can pay the amount corresponding to the rent after having entered the property.

For example, if the person starts living in the apartment on the first day of the month, they can only transfer the amount at the end. This is a less advantageous option than the previous one. This reinforces the need for it to be agreed upon by everyone in a well-defined manner.

What are the advantages and disadvantages of renting without a guarantee?

Every property rental model has its advantages and disadvantages, and the same is true for renting without a guarantee.

On the one hand, it brings enormous advantages for both the landlord and the tenant, from greater agility in evicting the tenant if necessary, to greater ease in renting the property itself and in charging in advance.

However, this model also has significant disadvantages. Mainly, it does not require the use of a rental guarantee, which, regardless of the type, provides significant financial security for the owner.

All of these points must be carefully analyzed so that no one makes the wrong decision and ends up in financial harm. So, take a look at these main points to gain a better understanding of each of these aspects:

Advantages of renting without guarantee

One of the advantages most valued by landlords in renting without a guarantee is the greater agility in the process of evicting the tenant in cases of default.

This is because, if we compare it to the process that occurs in contracts with guarantees, the eviction can take a long time until it is actually approved. This is a direct consequence of the large amount of bureaucracy that these documents require.

With this increased speed, it is even easier to find another tenant interested in the property and formalize your stay. This makes the rental itself much more agile, dynamic and optimized.

This is the second advantage of this rental model. The logic here is simple: the less bureaucracy involved in the process, the more attractive it will be for the tenant. And, consequently, their stay at the location with the payment of the rent, without the property being unoccupied for a long time.

Contracts with guarantees can make renting very difficult. Especially those whose owners are more “rigid” with their preferences. For example, those who want the tenant to present a guarantor as financial security.

Imagine what happens in the case of tenants who do not have the financial means to pay for this guarantee. The process becomes even more complicated and lengthy!

Finally, renting without a guarantee provides important financial security to property owners, in the specific case of prepaid rentals. In this case, property owners receive payment of the rent in advance, eliminating the risk of financial harm.

Here, it is important to emphasize that the landlord cannot demand payment of a double guarantee. In other words, in addition to this advance deposit, he/she can also charge a security deposit or bond, for example.

Disadvantages of renting without guarantee

The first disadvantage of renting without a guarantee is the greater difficulty that landlords may have in collecting late payments.

Let's assume that a tenant has not paid rent for two months in a row. In this situation, the landlord can, in fact, evict the tenant from the property more quickly. However, he will be left with two months of financial loss due to the lack of a guarantee agreed upon in the contract.

This is another and perhaps one of the biggest disadvantages of this rental model. After all, no matter how bureaucratic it may be, there is no denying the importance of a guarantee in the process of renting a property.

They were created as a protective measure for the landlord in cases of default. Therefore, there are several options available on the market so that landlords can choose the one that is most favorable according to their needs.

This importance has become even more evident in the last year. Data released by the IBGE showed that many tenants had to negotiate their rent with their landlords due to the financial difficulties they faced.

Numerically, negotiations grew 18% in 2020 compared to the previous year, according to the Real Estate Market Panel . These are seemingly negative figures. But they actually show the wide variety of options that rental guarantees allow for rental agreements that benefit both parties.

Is renting without guarantee a common model?

No. To this day, renting without a guarantee is not one of the most common or sought-after rental models on the market. However, it is completely permitted under our legislation, as long as its rules are clear and agreed upon between the landlord and the tenant.

Therefore, the first point that must be taken into consideration when choosing this model is the financial issue. There cannot be any type of economic abuse on either side in terms of charging anything more than what is due.

In other words, the owner cannot choose to rent out his property without using a guarantee and, furthermore, require the tenant to pay a security deposit. This is a double charge that becomes completely illegal, causing abuse to one of the parties involved.

The Tenancy Law itself is clear about this duty. Only one type of guarantee must be chosen in the rental agreement, or in this case, its absence. Let's remember what the main guarantees are.

Rental guarantees

There are several types of rental guarantees available on the market. Among them, the main and most popular are the guarantor, surety insurance and security deposit.

For many years, the guarantor was the most widely used rental guarantee on the market. However, today, it has lost strength in relation to other models due to the major disadvantages it brings in practice.

This happened because whoever decides to take on this responsibility runs a great risk of having to pay a huge amount due to the tenant's default. This is a huge risk that, combined with the bureaucracy and criteria regarding who can be a guarantor, has caused a reduction in the number of people who accept this role.

On the other hand, the security deposit is one of the most common models used in property rentals. In fact, it has already become the second most used type of rental guarantee in the city, according to Secovi.

It works as an advance payment made to the owner, deposited before the tenant moves into the property. Its value usually corresponds to three months' rent, at most, and must be deposited into a joint account or savings account.

At the end of the contract, it must be returned to the tenant if everything goes normally. This is the main advantage of this model that has made it so popular. This is thanks to its greater flexibility and economic protection for the landlord.

Finally, surety insurance is one of the most affordable types of guarantee for tenants. Like other insurance models, it has a cost to hire that can be paid in monthly installments according to each person's needs.

In practice, it offers specific coverage for the rental value and all fees related to it, such as property tax and condominium fees, for example. But in addition to this, it can also cover other policies that cover taxes, water and electricity bills, or legal fees in eviction proceedings.

Its main advantages are that it provides great flexibility in payment and practicality in renting properties. It is no wonder that this model saw a 76% increase in revenue in Brazil in 2020, according to the National Federation of General Insurance (FenSeg).

More than R$813 million had been raised by November last year, an impressive amount.

What to pay attention to when renting without a guarantee?

Renting without a guarantee brings great advantages to both the landlord and the tenant. However, the simple fact of not requiring a rental guarantee brings up a very important point to pay attention to before signing the contract: the tenant's credit analysis .

With this analysis, it is possible to identify whether the tenant has a bad credit rating and a history of bad payments in the market.

This is a very important security point for the owner, so that they avoid doing business with someone who has such a history.

Even in these cases, many landlords still decide to rent out their space, but we must emphasize that you must be very careful!

Of course, it is not possible to be 100% sure that a tenant with a clean record will keep paying the rent on time. However, even the smallest sign of non-payment should be taken into consideration when choosing a future resident of your property.

How to perform credit analysis

Credit analysis involves a thorough and complete study of a person's entire payment history. Its objective is to assess the tenant's financial capacity, that is, whether they will be able to pay the rent.

At the end of this assessment, each person will receive a grade (credit score) that will indicate exactly this probability. It can vary from 0 to 100, and the more outstanding debts a consumer has, the lower their score will be.

See how it would work in practice:

• 0 to 300: high risk of default
• 301 to 700: medium risk of default
• 701 to 1000: low risk of default

This procedure, however bureaucratic it may be, is extremely important to ensure that the owner is not financially harmed. In fact, it is the procedure we follow here at Citas .

After all, our mission goes beyond helping you find your dream apartment . We support and take responsibility for the day-to-day lives of our citizens, from signing the rental contract to their daily routine during their stay.

To do this, our system allows us to conduct in-depth research on our tenants. It analyzes not only their credit scores, but also other essential elements for signing the rental agreement.

Come and learn more about our community and our units !

Conclusion

Rental guarantees are extremely important to ensure economic security for the owner. However, renting without a guarantee can also bring the same feeling, through an advance deposit in the amount of rent.

If you are interested in this model, it is essential to know it thoroughly before signing the rental agreement. This way, you will know exactly what points should not be left out before creating this document.

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