You may think you're saving money. But renting to own could end up costing you double or triple the price of the product. Consider lay-aways, and scratch/dent stores.
The ads are appealing: "Rent to own a 50-inch plasma TV in 20 easy installments!" Only the installments aren’t easy. But the payback is fabulous, for the retailer, that is. The deal is only good for you if you don’t mind making interest payments of double or triple what the product is worth.
Sure, you can return the merchandise any time and you don’t owe any more. But what you may not realize is that TV would be a lot cheaper if you bought it outright at an electronics store. Rent-to-own stores are notorious for charging an annual percentage rate of 100 to 200 percent and more.
And if you get behind on the payments, you’ll not only owe more interest, but you could hurt your credit rating in the process.
Rent-to-own Alternatives:
Good old-fashioned lay-aways These plans may have gone the way of the drive-in movie theater. But they are starting to make a come-back, especially among today’s financially strapped consumers. K-mart offers this service and Sears does also for certain items. You make an initial downpayment and agree on set installments until the merchandise is finally paid for. That’s when you get to take the item home. There’s no instant gratification with this plan and no interest charges either.
Savings account or certificate of deposit You’ll earn interest instead of paying it. You’ll be surprised at how fast your money will grow. Set up a budget and vow to contribute a certain amount each month to the account. You’ll feel good that you saved the money. And when you finally have enough to buy the merchandise, it will mean that much more.
Bank loan If you simply have to have the item right now, at least a bank will lend you the money at a much lower interest rate than a rent-to-own store. Be sure to ask for an unsecured loan. A home equity line of credit may be easier to obtain, but if you have trouble paying back the loan, you could lose your house.
Low-interest credit card You’ll have to shop around for these. You can find low interest cards with no annual fee. But you have to have good credit. Check with your bank. If you have a long-standing relationship, you may be able to negotiate a lower APR.
Scratch and dent stores The damage is usually minimal and the savings are great. Also search online furniture and electronics stores. You might be able to find better deals than in your own neighborhood.
Garage and estate sales You may not find the latest in consumer electronics here, but if you look hard enough, you might discover a treasure trove of high-end furnishings.
The copyright of the article Rent-to-Own Store Problems in Consumer Education is owned by L. Marie Dubuque. Permission to republish Rent-to-Own Store Problems in print or online must be granted by the author in writing.
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