When you need to purchase furniture, a new TV, or any other expensive product, it can be tough to buy the object outright without emptying your wallet. This is doubly true if you have low or no credit and can’t afford a decent loan with good terms and a low interest rate.
However, there may be another option: rent to own financing. Rent to own is a unique financing model used by homebuyers, people who need furniture or appliances, and more. Today, let’s break down what rent to own means, how it works, and whether rent to own may be a good financing strategy for your goals.
What Is “Rent To Own”?
In a nutshell, “rent to own” financing means that you rent an item or home for a while until you eventually pay the full purchasing price for that item or house. For example, some landlords offer rent to own leases to tenants who wish to purchase their property eventually, but who don’t have enough money to cover the total cost.
Instead, the tenant enters into a rental agreement with the following terms:
- They agree to rent the property from the landlord for a set timeframe, usually several years
- During this timeframe, they pay a fixed monthly rent payment toward the purchasing price for the property each month
- At any point during the rental period, the tenant can take the early purchase option and take ownership of the property. A real estate attorney, mortgage lender, or real estate agent may be needed to finalize the transaction
- Alternatively, they can simply leave the property and not go through with the rental purchase. With this model, the tenant hasn’t lost money since they have still paid rent for a place to live (presumably at a fair market rate)
- The renter is under no obligation to buy the property at the end of the lease agreement, although there may be an option fee associated with the lease-option agreement to cover this possibility for the landlord
In many real estate cases, rent to own is useful for tenants who don’t know whether they want to purchase a home in a specific area (as in cases where their jobs require them to move around a lot).
These deals are popular since they:
- Allow landlords to get fair market value for the purchase price of the home
- Have strict payment requirements, often needing money stored in an escrow account
- Net the same profit for a landlord as normal mortgage payments
- Attract potential buyers through affordable lease payments
For these reasons and more, many modern home shoppers look for a good rental-purchase agreement.
However, rent to own financing can also be used for buying furniture and a variety of other moderate to high-priced items.
What Is Rent To Own Used For?
Rent to own financing is frequently used for furniture purchases, appliance purchases for refrigerators and similar items, and more. Rent to own is oftentimes a good choice for:
- People who don’t have any or good credit, as it is difficult to open a line of credit or get a good loan with a low or no credit score
- People who don’t have a lot of income, but who still need an appliance or new piece of furniture ASAP
- People who want to try out a new piece of furniture without buying it outright before they know if they love it
However, anyone using rent to own financing should carefully read the terms and conditions for a new contract. Some rent to own purchase agreements are better than others.
How Does Rent To Own Work?
Rent to own usually works with the following system:
- The buyer or tenant agrees to pay a fixed amount to the seller of the property or item in question
- If enough time passes with regular weekly or monthly payments, the buyer or tenant takes possession of the property or item
- Alternatively, the buyer or tenant can stop paying rental payments. At this point, the original owner of the property or item takes repossession of it
For example, imagine a homeowner who wants to try out a new couch for their living room. They enter a rent to own financing agreement with a furniture store. They pick up the couch, and use it for two months, paying two equal payments every 30 days.
However, they discover that the couch isn’t a good fit for their home. In this scenario, they can return the furniture and don’t have to spend more money on it. They have only spent a comparatively small amount of money relative to what they would have spent if they purchased the couch themselves.
In another scenario, the homeowner decides the couch is a great fit. Therefore, they decide to keep making monthly payments until they pay down the entire cost of the couch. If they have a little extra cash, they might also decide to buy the couch by paying for the remaining purchase price immediately in a lump sum payment.
As you can see, rent to own furniture and other financing deals are similar to one another no matter what item or property is being financed. The details, such as whether an interest rate applies, if there are any fees, and the terms of the rental contract, vary from contract to contract, however.
The Benefits of Rent To Own Furniture, Appliances, and More
Lots of people opt for rent to own financing due to its many benefits and advantages.
Affordable Purchases
For starters, rent to own financing allows you to make affordable furniture or appliance purchases without having to totally empty your wallet or save for months or years. This is especially useful in the real estate market.
Many modern Americans have difficulty scrounging up the cash necessary for a house down payment. But with a rent to own lease, Americans can instead rent a property for an affordable monthly rate, then gradually take ownership of the property provided they keep up regular payments.
The same principle applies when using rent to own financing for furniture. For example, if you find an excellent lounge chair for $500, but can’t afford it just yet, you can put down a minor down payment or pay an upfront fee and rent the furniture until you own it instead. That way, you don’t have to wait for several paychecks to pile up before taking possession of awesome new furniture!
Flexible Payment Plans
On top of that, lots of rent to own furniture finances offer flexible payment plans. For example, depending on the financing contract you sign, you might be required to make payments weekly, monthly, or on some other schedule.
Regardless, you can usually choose the payment cadence that works best for your budget. For example, if you get paid every two weeks instead of every four weeks, you can typically set up a rent to own contract so you make an automatic payment toward your financed products every two weeks instead of every month.
In this way, rent to own furniture financing works with you instead of against you no matter where you work or how you get paid. Many rent to own furniture financers include auto-pay controls or settings, too. This way, you never forget a payment and don’t have to be settled with a late fee or repossession of your furniture.
Immediate Satisfaction/Use
Perhaps the most important benefit of rent to own furniture financing is immediate use of your rented products. When you rent to own a new expensive TV, for example, you don’t have to save up money before you can watch the game with your friends.
Instead, you can rent the TV, bring it home, and set it up in your living room while paying a very small price in comparison to the total purchase price. Then, you can make payments every month or every few weeks, enjoying your new TV all the while.
Since rent to own financing doesn’t typically require a credit score or include interest, your credit also isn’t negatively affected. This stands in sharp contrast to other financing models, such as taking out a loan.
No Negative Credit Effect
Let’s touch on the credit history effect again. This is a major benefit of rent to own and lease to own financing from Becca’s Home.
For instance, when you lease furniture from Becca’s Home, we don’t look at your credit score when determining whether you qualify. In addition, lease to own and rent to own furniture financing doesn’t use credit. You never borrow money during any stage of the process.
Therefore, it is unlikely your credit score will be negatively affected by using rent-to-own or lease-to-own financing. This can be very advantageous if you are trying to build up your credit score after bankruptcy or trying to build your credit score from scratch.
However, while rent-to-own or lease-to-own financing doesn’t negatively affect your credit score, it can positively affect it. If you make regular payments on time, and in their full amounts, most financers will report that information to the big credit bureaus (TransUnion, Equifax, and Experian).
Each time this information is reported, your credit score may receive a significant bump.
Becca’s Home Lease To Own vs. Rent to Own Furniture
While rent to own furniture financing can be useful, it’s a little different from the lease to own options we offer at Becca’s Home.
The primary difference between a lease to own furniture contract from Becca’s Home and a rent to own furniture contract from another provider is this:
- When you rent to own furniture, you can stop renting the furniture at any point and not take possession of it
- When you lease to own furniture from Becca’s Home, you plan to purchase the furniture eventually. Therefore, we offer additional payment options, including a 90 day “same as cash” purchasing option for those who want to own their furniture quickly
In this way, Becca’s Home lease to own financing is a much better choice if you know you want to buy furniture for your house or a specific room, but can’t afford the furniture pieces’ full prices right now.
How Our Lease To Own Agreements Work
Not sure if lease to own financing from Becca’s Home is right for you? Here’s how the process works, plain and simple:
- First, you browse our extensive catalog of attractive furniture pieces, including beds, couches, and much more. Our furniture selections are comprised of stylish, modern pieces. You can also browse custom-curated room packages or pick up individual items à la carte depending on what you need
- Then, you enter a lease-purchase agreement with Becca’s Home. We retain ownership of your chosen furniture pieces until you pay off the total price. Our standard lease to own contracts are 17 months long; each month, you pay the same price without worrying about interest or credit score decreases
- If you come into some extra cash, you can own your item early and utilize our 90-day same as cash program. With this model, you’ll pay the exact same price for the furniture as you would if you picked it up for cash in just three months
- You can alternatively pay off your furniture early if you come into some extra cash and potentially save up to 50%
With this system, it’s easier than ever to own the furniture you love even if your income isn’t very high or your credit score isn’t great. Think of lease to own financing from Becca’s Home as an advanced, more flexible financing system compared to other rent to own financing offers.
Summary
At the end of the day, rent to own is a financing model intended to help folks just like you get the furniture, appliances, or houses you deserve. With rent to own or lease to own financing, you can fill your house with beautiful, comfortable furniture without breaking the bank.
Even better, you can get started today when you visit our website or contact Becca’s Home. Signing up for an account and browsing our furniture selection is easier than ever. Why wait? Check out our furniture catalog and get started leasing furniture from Becca’s Home!
Sources:
Rent-to-Own Homes: How the Process Works | Investopedia
What is a credit score? | Consumer Financial Protection Bureau
