Renters use rent now, pay later' services to manage monthly payments, but fees raise concerns

"Rent can eat up an entire paycheck at the start of the month, so a growing number of renters are turning to a financial product that promises relief by letting them split the bill for a price. So-called rent now, pay later services have emerged over the past few years as housing costs climb and paychecks grow less predictable, particularly for lower-income and gig-economy workers."

"Kellen Johnson, 44, started using Flex to split up his rent payments about two years ago. Instead of paying the whole $1,850 of his rent on the first of the month, Johnson would pay $1,350 on that date, and $500 on the 15th. For the service, Flex collected a $14.99 monthly subscription fee, as well as 1% of the total rent, which for Johnson was $18.50, bringing his monthly charges for the app to more than $33."

"According to the Bureau of Labor Statistics, rents have jumped nearly 28% in past five years. Companies such as Flex, Livble and, more recently, Affirm, say breaking rent into multiple payments can help renters manage cash flow. But consumer advocates warn the products typically function like short-term loans, layering fees onto already strained budgets and, in some cases, carrying triple-digit effective interest rates raising questions about whether they ease financial pressure or deepen it."

Rent-now-pay-later services allow renters to split monthly rent into multiple payments for a fee, aiming to ease cash-flow pressures. Companies such as Flex, Livble and Affirm market these products to renters facing rising housing costs and unpredictable paychecks, especially lower-income and gig-economy workers. Consumer advocates warn the products often function like short-term loans, adding fees to constrained budgets and sometimes producing triple-digit effective interest rates. One renter paid a $14.99 monthly subscription plus 1% of rent, increasing his monthly cost by over $33. About 109 million Americans are renters, and many households spend 30% or more of income on rent.

Read at www.ocregister.com