YOU DECIDE: Is Rent to Own Right for You?

For victims of identity theft, one of the most frustrating parts of the process is enduring the damage to their credit reports. Even if the case is handled efficiently and professionally, the months of waiting for the issues to be resolved can be bothersome, especially if you had large purchases planned before the breach occurred. Of course, there are many reasons—not all of them criminal—why an individual’s credit report might be less than perfect, such as credit card balances, late payments or failure to pay, divorce, job loss, and more, which is why many consumers may find themselves turning to rent to own options for high-cost items.

Whether it’s for household purchases, major appliances, or even a new home, there are many options for purchasing the item that don’t involve paying cash, using a credit card, or taking out a traditional bank loan. Rent to own or lease to own options offer consumers the choice to stretch out the payments into longer term or smaller dollar amounts, without having to use these more common forms of payment structures. The process, though, can come with some hidden downsides.

First, it’s important to know that there are legitimate reasons for a rent to own arrangement. If you have poor credit, no matter the reason, it can be a way to demonstrate your ability to make payments and be financially responsible, which can improve your credit score over time.

In the case of housing, it can be a great way to buy a home if your credit doesn’t allow you to be approved for a hefty mortgage or if you can’t afford the closing costs at this time. It can also help you lock in the price of a home during an especially good “buyer’s market,” even if you’re not quite ready to take out a mortgage. Of course, individuals who need a home due to relocation or a job change might consider this option since they aren’t losing that rent money if they decide to buy the house, but are also not locked into a long-term lease or purchase if the new job doesn’t work out.

As for purchases like home appliances, rent to own can offer consumers a way to buy an emergency item without maxing out a credit card, especially if the current balance won’t allow for the purchase. This could be helpful if your hot water heater or your washing machine go out, for example, both of which most people find they cannot live without. In some places, the utility company will sell the replacement to the customer and simply add the payments to the power or gas bill, again providing the new appliance without increasing the customer’s credit card balance.

But there are important fine print items to understand before you enter a rent to buy agreement. In the case of a home, you may find that there are no covered repairs or that you’re responsible for making improvements to the property, such as agreeing to paint the interior, as the owner’s way of ensuring that you’re more likely to follow through with the purchase. As for appliances, you very often will find that the total cost of the appliance at the final payment has ended up being double or even triple what it would have cost to purchase it outright. There can also be additional delivery fees, late payment or repossession fees, and damaged item fees, and you may find that missing even one payment could result in having the appliance repossessed on top of these fees.

If a rent to own agreement sounds right for you, be sure to do your homework and read up on the terms before you sign. Ask the seller any questions you may have, and if you feel like the answer is not clearly covered in the contract, get it in writing. Making an informed decision now can save you a lot of headaches and unexpected costs down the road. 

 

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