Rent To Own

A Type of Credit

What is Rent to Own Credit?

A lender loans something, like furniture or appliances, to the borrower with the condition that the item will be owned by the renter if the term of rent is completed.

Interest rates and fees?

Subtract the option fee, which is typically 1 to 5 percent of the purchase price, from the rent-to-own purchase price. Multiply the loan amount by the agreed interest rate to determine the annual interest.

Average APR and Fees?

On average, rent to own APR fees are about $270,000.

Sources of this Credit?

Rent-a-Center

Aaron's

Color Tyme

When is this credit seeked?

Whenever a borrower wants to rent an item for a limited amount of time instead of paying for the whole thing and having to resell.

Advantages of Rent to Own?

Borrowers have time to earn income and rebuild credit since the payment is over time. It is an easy, low-stress form of credit and the borrower is in complete control of the item being rented as long as payments are being made.

Disadvantages of Rent to Own?

If they borrower fails to pay the original mortgage on a rented house, it might be foreclosed. Borrowers also must pay an upfront option fee.

Alternatives to Consider First?

1. Qualifying for Store Financing

2. Layaway

3. Think about if you have room on your credit card