Rent to Own Furniture and Electronic Alternatives
For many people, rent to own sounds like a great idea. You get the items you want, and you only pay small payments. The companies usually offer a lot of free things as well. You can get free delivery, installation, and service calls. You can also so get approval with no credit check and no down payment on furniture and electronics. Also, if you can’t make your payments, you can usually send the item back without any credit score damage.
Does this sound like something that is too good to be true? If you think so, you’d be completely correct. Renting to own involves something called financial charges. These charges go by your payment plan agreement. So, if you decide to make smaller payments, you’ll pay more in finance charges. This is how you could potentially pay double for an item if you rent to own it.
Example of Possible Interest Charges With Rent to Own
For example, say you had a credit card that had a 20% APR. Then you purchased a $450 sofa with it. You pay it back over 22 months, so you’d pay around $90 per month. Now let’s compare it to a rent to own contact. You buy your $450 sofa and make $20 weekly payments for 52 months. This makes your new sofa go from $450 up to a huge $1,040. That’s more than double the original cost, and it’s because of the financial charges.
Another reason you want to avoid rent to own operations is that they’re largely unregulated. This is because you don’t finance with them, and they don’t do a credit check. So by Federal law, they’re excluded from any Federal regulations. This makes your risk as a buyer skyrocket.
It’s also important to note that missed payment procedures vary from company to company. One rent to own company may add on a missed or late payment fee. However, other companies may come and repossess whatever you’re renting to own. If they do this, you’re out all of the money you’ve already paid on the balance. Even if you’re one payment short of finishing out the contract, you’d have to start over.
Alternatives to Renting to Own
If you don’t want to fall into this common trap, there are alternatives. They’re better for your credit, and for your wallet. We’ll go over three good alternatives you may want to check out.
Thrift or Second-Hand Stores
One alternative is buying gently used furniture or appliances from thrift stores. Garage sales are another good place to check. You can use this furniture while you rebuild your credit. It’ll also allow you to save money so you can start paying off any bad debt. Anything you can do to save money and build your credit is a good thing.
It’s a safer alternative to rent to own. Also, you’ll own the items outright. You can now take your time and start fixing or building your credit. When your credit is good enough, you can move on to buying furniture and appliances with 0 interest financing.
Consider 0% Financing Options Rather Than Rent to Own
For anyone that has decent credit, a 0% financing option can be a good choice. Obviously buy now pay later is better than rent to own. You can still buy your item now, but you pay it off over several months. It’s also regulated by the Federal Government because it comes in the form of a retail card. You’ll make small monthly payments until you reach a $0 balance.
These types of offers are good as long as you know what you’re getting. The goal is to pay the item off before the 0% financing period ends. If you don’t, this is where the trouble starts. These cards have a retroactive interest rate. This means that if you don’t pay the item off in time, the lender will add interest. This interest will backdate to the first month you had the card.
The interest rates on these cards to finance furniture and electronics are also high. The lenders are taking a bigger risk when they use these cards, and the interest rates help protect them. The rates usually hover around 24.8%, and this can be double what a traditional credit card’s rate is.
Proceed With Caution With 0% Interest Finance Programs
For example, you apply and get one of these cards with a 0% financing option. It has a retroactive interest rate of 23%. You decide to buy a television for $750. Then you spread the payments over 12 months, and this amounts to around $62.50 per month. You make all of your payments on time except the very last one, and the promotion ends. The lender will now take that 23% interest rate and charge 12 months’ worth to your card.
This can be a good deal if you pay close attention to the terms and conditions. As long as you’re sure that you can pay the balance off in time, you can reap the benefits. It’ll build your credit, and you get your items now.
Fingerhut Catalog Company
If a 0% financing option sounds too risky, there is another option instead of rent to own. Fingerhut is a more cost-effective option for people with really bad credit. There are two tiers of credit programs you can apply and get. First, if you have decent credit, Fingerhut’s Advantage Credit Account is a good option. If you have really bad credit, Fingerhut’s FreshStart Program is a good choice.
Fingerhut FreshStart Program
Basically, the FreshStart Program comes from the company WebBank. It’s a payment installment program that helps to build your credit. You can also use it to get better credit lines with Fingerhut themselves. To start the process, you have to apply. It’s completely online, and you’ll know in 60 seconds if they’ll approve you or not.
When they approve you, you have to make a one-time purchase. It has to be over $50.00, and this includes the shipping and handling fees. Once your order goes through, you have to pay a $30.00 down payment. Fingerhut will subtract the $30.00 down payment from your order’s total. They’ll now ship your items to you.
You’ll make monthly installment payments until you pay the balance off. If you pay off your entire balance without missing a single payment, Fingerhut will upgrade your account. They’ll give you a Fingerhut Advantage account. Eventually, you’ll get better credit lines that have no interest financing. However, you can only upgrade if you make your payments. It doesn’t count if you pay your balance off in one shot.
Why Fingerhut is Better Than Rent to Own
These Fingerhut accounts give borrowers a lot of flexibility. They have brand name products to choose from, and you get a broad range of choices. Also, you get months to pay off your balance. The opportunities for upgrades are also generous. It does have a higher APR, but it’s a good way to practice using it responsibly. With the Fingerhut Advantage program if you don’t want the APR, pay your balance in full each month.
There are also very little fees for this type of account. They only start to tack on fees if you start missing payments. You won’t pay an annual fee, membership fees, or monthly fees. All you pay is the one deposit, but the lender subtracts it from your balance. This is a cheaper alternative to buy your furniture and electronics from Fingerhut than rent to own. Also, you will be building your credit history that will help to build credit fast. In time you will be able to qualify for 0% interest credit offers.
If you want to know more, you can click here for a more comprehensive review. The associated YouTube video is another excellent resource you may want to check out.
Bottom Line on Rent to Own Programs
Rent to own may seem like a good idea at first, but it has huge pitfalls. There are safer alternatives, and they’ll help your credit. It pays to shop around and look at the various programs available to you. If it’s possible, avoid rent to own. You’re trying to make your situation better, and you don’t want that setback.
Latest posts by Monica Kowollik (see all)
- Lose your credit card? What to Do With a Lost Credit Card? - August 8, 2018
- Who is a Secured Credit Card Good For? - July 26, 2018
- How to Pay Your Credit Card Bill and 2 Payment Myths - July 20, 2018