Surety bond or security deposit: which is better?

Renting a property involves a certain amount of bureaucracy and when the tenant is uncertain about paying the rent, a guarantee is required from the tenant. Currently, two of the most commonly used forms of guarantee are insurance and security deposit.

To ensure that the rental agreement goes well, the owner asks the tenant to choose one of these options, which will serve as a guarantee for payment of the rent in case of default or even to repair any damage to the property.

Before choosing the best guarantee, it is important to be well informed about the characteristics of each type, their advantages and disadvantages, so that you can make this personal decision according to your financial availability. It is worth mentioning that there is the possibility of renting without a deposit .

Surety Bond VS Security Deposit

surety bond

This guarantee is very similar to other insurance models. Also known as rental insurance , it consists of taking out insurance for a certain amount, which you can pay in monthly installments according to the financial situation of the contractor. And the service is activated by the landlord in case of default.

In addition to the rent amount, the insurance can also cover fees related to it, such as property tax, condominium fees and even bills such as water and electricity. One advantage of the surety bond insurance is that the amount and scope of the coverage are defined in agreement between the landlord, the tenant and the insurer.

The surety bond is currently one of the most widely used guarantees due to advantages such as the lack of a guarantor. But not only because of this, but also because of the greater flexibility of payment and greater practicality. However, unlike the security deposit , the amount collected does not go back to the tenant at the end of the contract.

Want to know more about surety bonds? Click here and find out!

Security deposit

This is another type of rental guarantee provided for in the Tenancy Law. It is one of the easiest to agree between the owner and the tenant and therefore one of the most used in the real estate market.

In this modality, the tenant pays the agreed amount, which must correspond to three months' rent at most, before starting to live in the property.

The amount is used in cases of non-payment of rent, but can also be used to cover any damages that the tenant causes to the property.

This amount is deposited into a joint account or savings account. At the end of the contract, if everything goes as normal, the money is returned to the tenant.

Another option is to use this amount as a form of payment for the last three months of rent of the contract. Both methods are possible and can occur as agreed between the tenant and the owner.

The main advantage of a security deposit is that there are no fees to pay. And if everything goes as expected, it also works as a kind of forced savings.

However, the disadvantage is that not everyone has this amount available or is confident that they can use this amount knowing that they will not need it in the future. This is because it is not possible to withdraw it in case of an emergency.

Want to know more about security deposits? Click here and find out more!

Which is the best?

As you can see, there are advantages and disadvantages to both forms of guarantee. Therefore, you need to evaluate carefully before choosing one of them to ensure that it is the best choice according to your financial situation.

An even more practical option is that of contracts without guarantee, which occur when the landlord and tenant agree that the property will be rented without the use of any guarantee, such as those from Citas.

Learn more about the lease agreement without guarantee, click here!

This modality has many advantages for both tenants and owners, mainly because it facilitates and speeds up the process.

The rental contract without guarantee can be made in two ways: through prepaid or postpaid rental.

The main difference between them is the payment term - that is, whether the amount charged will be paid before or after the tenant moves in.

In this modality, after the credit analysis, just pay and move in. See here the apartments without guarantee from Citas!