Rent-To-Own Plans
Although it may not be apparent at first, rent-to-own plans are also a form of borrowing. In a typical rent-to-own plan, the consumer takes possession of furniture or an appliance in exchange for weekly or monthly ‘rent’ payments. At the end of a specified period, usually 12 to 18 months, the consumer assumes ownership of the merchandise. In essence, this is the same as purchasing on credit whereby the consumer assumes possession of merchandise upfront and agrees to pay off the cost of the item plus interest over time. Because this arrangement is not marketed as lending, rent-to-own stores are not required to disclose effective APRs to consumers. However, when you do the math, those APRs average 100% and may run as high as 275%.4
Use the Credit Comparison Tool to see this type of credit in action.
4. U.S. PIRG
