Rent-to-Own: Blessing or Trap?

October 16, 2008 · Posted in Personal Finance 

Most people hit a point in time where they truly need something such as new furniture or appliances, yet just don’t have the money to pay for them. Their credit may also not be the best it could be either. This is usually when they flock to the nearest rent-to-own store. They know that, here, they can get whatever they need by making that first weekly or monthly payment, and signing a contract in which they agree to pay this same amount weekly or monthly for a certain length of time. They can also leave the store with the items they need that very day, or have it delivered within 24 hours.

It all sounds so very simple, doesn’t it? In many ways it IS very simple. However, in other ways, it can be a huge trap. When you enter the rent-to-own store you may be in such a desperate situation that you don’t even bother to read the fine print on your contract. You are probably also not looking at the highly inflated interest rate you are paying to “rent” your new refrigerator or living room suite. All you see is that you can pay an affordable amount of money and walk out the door with what you need. This interest rate DOES add up, too. You usually end up paying 2 – 3 times higher the amount than you would have if you had purchased it elsewhere outright.

The good thing about these programs, though, is that people CAN get what they need immediately, even with bad credit. This is a life saver to many who simply cannot have the things they need in the time frame they need it. In addition, you will have monthly or weekly payments that you can budget for. So there are no unpleasant surprises. However, if you miss a payment with these stores, you can expect a phone call the day it becomes past due. You will also have late fees added to the past due payment. If you default on your payment too many times in a row, the account manager will show up at your door with the store truck to take back the merchandise. This means you will lose all the money you have paid into it.

The rent-to-own stores have both good points and bad points. But if you are truly in a situation where this is your only answer, you can make it work for you. You can budget your payment, and even double up on them when possible. Once you have completed the contract, your item will become yours. You may have paid more money than you should have, but at least you were able to get what you needed when you needed it.


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