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7000 Peters Creek Rd., Roanoke, Virginia
1-866-260-5994 |
CCCS of Southwest Virginia |
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Rent-To-Own Deals Can Cause Problems
If You’re Not Careful |
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It’s a familiar situation to most people. You’re short of money and can’t get good credit, and you want to make a major purchase. It can be very frustrating. In this situation, one of the avenues available to you is a “rent-to-own” agreement, involving a weekly payment for the rental of furniture, appliances, televisions, or stereos.
There are several reasons people choose “rent-to-own” agreements, but the primary one is the perception of affordability. For someone who moves into an apartment and needs new furniture, but has a limited budget, $20 a week sounds pretty manageable, especially compared to a purchase price of between $500 and $1,000.
Before you sign on the dotted line, however, consider the total cost of the agreement. If you have an 18-month agreement at $20 a week, your total payments add up to $1,560. That’s a lot of money to pay for a purchase that normally carries a price of only $700 to $800. Then consider that, if you change your mind during the agreement, your only option is to return the merchandise, at which time you own absolutely nothing in exchange for all your payments.
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Most “rent-to-own” companies have a liability charge if themerchandise is damaged when you return it. They may also charge a penalty for canceling before the end of the agreement. So it is essential that, if you decide on this kind of agreement, that you know what the potential damage charges and cancellation penalties are.
Another reason people make purchases through “rent-to-own” agreements is to build a good credit rating. Often, young adults and recently-divorced women will find that they cannot get credit because they have no credit history. It’s important to note, however, that your credit rating will only affected if the company you are buying from reports to the credit bureaus. Otherwise, all your timely payments will have no affect on your rating.
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So let’s say that, after fully understanding how “rent-to-own” agreements work and what the potential pitfalls are, you decide to make such a purchase. There are still a few steps you should take to make sure you get the most beneficial deal.
First, read and understand the contract thoroughly before you sign. Understand the penalties for canceling, the liability for damages, the length of the agreement, the exact weekly payments, and the sum of all the payments at the end of the contract. And if you don’t understand something, ask someone to explain it to you.
Also, make sure the weekly payment fits into your budget without affecting your ability to pay for your rent, utilities, food, and other necessities. Most of these agreements last for 18 months or longer, so if you aren’t sure you can afford it, you may want to consider other options. Otherwise, you may end up flushing a lot of money down the drain after canceling the agreement.
As with all creditors, if you find yourself unable to make your payments, or discover that you are going to be late with one, contact the company and let them know. Your willingness to work with them will go a long way toward getting them to work with you.
Finally, many of these agreements come with a maintenance program at no additional cost. Take advantage of it if there is a problem. If your “rent-to-own” television starts having problems with the picture, call the company you are renting from and have someone come repair it.
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CCCS, A Division of Money Management International
Regional Headquarters - 7000 Peters Creek Rd., Roanoke, Virginia
Corporate Address - 9009 West Loop South, Seventh Floor, Houston, TX 77096 |
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