How Does Renting to Own Work?

Renting to own can be an easy way for people who cannot get financed or get a loan through a bank because of bankruptcy, poor credit or slow credit. Renting to own can apply to things such as furniture, electronics or appliances and even homes. It is an easy way to purchase something if you do not have the money for it right away, however, renting to own can sometimes be very pricey.

What do I need in order to rent to own?

First of all, renting to own things such as appliances, furniture and electronics is relatively easy. You simply have to find a store that offers this option. Places like Rent a Center and Aaron's are two of the more well-known rent to own stores. You must go into the store and choose the item that you wish to rent. These stores usually determine what you can afford based on your income, so make sure to take your pay stub to prove income, as well as a utility bill, which would serve as proof of residence. You will also need some references, complete with phone numbers and addresses. Once you get all of your paperwork in order, you will need to fill out an application. It will ask for your name, address, phone number, place of employment and monthly income. You will then have to sign a rental contract with the company for the item you have chosen. If you are renting to own a home, the same sorts of rules that apply to home renters will apply to you. You will need to sign a contract, provide references and proof of income.

How does it work?

Once you have completed all the necessary paperwork you are ready to start renting to own. You will be given a payment schedule that will outline how much each payment will be and when the payments are due. Rent to own places typically expect payments to be made on a weekly basis, however, depending on your pay schedule, they can be adjusted so that you can make them monthly or bi-weekly. You can set up an automatic draft through your bank, or you can choose to walk payments in.

Regardless, of which method you choose, the final price will include the sales price, in addition to the interest rate. The interest rate at rent to own stores can be extremely high and by the time you are finished making your payments, you can sometimes pay double for the item. For example, if you purchase a sofa for $800, the rent to own store will sometimes charge you just as much in interest, leaving you with a $1,600 final bill. This is one reason that rent to own stores are often not worth the money, unless you are in dire need of such a service. Either way, you continue making payments on your merchandise until the rental contract is up. Once that happens, you will own the item that you have been renting. If you default on the payments, the store will come to your home and repossess the item that you rented. If this happens, then you lose all of the money that you have already paid. They will not refund any portion of the payments you have made. If you rent to own a home, it works in much the same way that regular home renting does. You will have a set number of payments in a certain amount to make on a monthly basis. Instead of the landlord just keeping the money as rent due, he will put your monthly payments towards the grand total of your home purchase. For example, if your contract is drawn up for a 15-year period, then you will continue to make monthly payments to the landlord for 15 years. Once the contract is up, then the home will be yours. At this time, the landlord will fill out all necessary paperwork to turn the home over to you. As with any rent to own situation, if you default on the payments, you may face eviction and will lose any money that you have put into the home's purchase.