What's Happening?
As housing costs continue to rise, a growing number of renters are utilizing 'rent now, pay later' services to manage their monthly payments. These services, offered by companies like Flex and Affirm, allow renters to split their rent into multiple payments throughout the month. However, consumer advocates warn that these services often function like short-term loans, with fees that can lead to high effective interest rates. For example, Kellen Johnson, a user of Flex, incurs monthly charges exceeding $33 for splitting his rent payments, which translates to an annual percentage rate of 172%. This trend reflects the financial strain faced by many renters, particularly those with unpredictable incomes.
Why It's Important?
The increasing reliance on 'rent now, pay
later' services highlights the financial challenges faced by renters in the United States. With rents rising nearly 28% over the past five years, many households are struggling to manage their housing costs, leading to a reliance on financial products that may exacerbate their financial burdens. This situation raises concerns about the long-term financial health of renters and the potential for increased debt levels. The trend also underscores the need for more affordable housing solutions and financial education to help renters manage their expenses without resorting to costly short-term loans.
