In recent years, more Americans have turned to a more expensive option known as “buy now, pay later.” Most financial experts advised consumers to avoid it due to its high interest rates.
However, this concept is now gaining popularity in the rental world. This is called Rent Now Pay Later (RNPL).
Here’s how it works
Companies like Livble, Flex, and Affirm are helping renters in need of financial assistance by paying their monthly rent in installments. Flex pays the landlord in full, and the renter pays installments to an intermediary such as Flex.
If your monthly rent is $2,000, Flex will pay your landlord $1,500 at the beginning of the month and the remaining $500 in the middle of the month.
RNPL supporters have cheered the program as a way to help people in the downturn, but financial experts say it comes at a higher cost. RNPLY should be avoided.
“If you read the fine print, these companies are giving you lines of credit, which means you pay more in fees and if you miss a payment, the interest rates go through the roof,” said Steve Beeman, a financial analyst at The Florida Daily.
Some companies charge service fees ranging from $14.99 to more than $33 per month, with interest rates exceeding 31%.
Flex says its more than 1.5 million customers spend about $2 billion a month on its services.
Financial analyst Steve Beeman said there was a need for alternative financing when times got tough, but warned that RNPL’s plans could put people further into the financial hole, especially if they still owe last month’s rent and need to pay next month soon.
