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Is Buy Now Pay Later (BNPL) the New Rent-to-Own?

Payments • December 23

Although the public doesn’t typically think of BNPL as an alternative to traditional retail financing solutions like rent-to-own or layaway, the practice of financing products upfront and paying them off at a later date has been around since the late 1800s. Purchasing products and paying for them over time was extremely popular during the Great Depression when people wanted to purchase consumer goods but didn’t have adequate cash on hand to do so.

An introduction to rent-to-own

Like buy-now-pay-later, rent-to-own is one of several alternative subprime financing solutions consumers turn to when they don’t have access to traditional banking options. Often used by those in immediate need of furniture, appliances, or electronics, rent-to-own solutions allow consumers to lease such items on a monthly basis, making payments in installments over time rather than at once. While payment plans may seem like an attractive option for those with limited financial resources, some argue that rent-to-own comes with its own set of pitfalls. In fact, some say that there are a number of differences between rent-to-own and similar buy-now-pay-later options like those offered by companies like Affirm or Klarna; while they may appear somewhat similar at first glance, there are actually some significant differences between POS financing and all but layaway—which explains why people who fail to look into them carefully could end up in trouble down the road. However bad you think it may be for your credit score when you finance something on credit instead of paying cash for it upfront, buying something from nonpayment companies can be even worse.

The benefits of renting instead of buying

One obvious reason to rent instead of buy is if you are short on cash. Another is if you do not plan to keep an item for long, as when renting tools or equipment. Other benefits include * You don’t have to worry about unexpected costs. The person or company leasing you something usually will take care of maintenance and repair; you just use it until it wears out, then replace it with a new version. * Low risk: When buying something, it can be hard to know exactly what you are getting into until after your purchase — manufacturers change product lines and make changes to designs so that what’s hot today may not be tomorrow (and vice versa). This means a lot more research is necessary to make sure that your big-ticket items won’t need replacing within two years because of an error made by the manufacturer. * Convenience: You can often get a large number of household appliances and other things by paying over time rather than having to save up all at once for each one.

What is BNPL?

Buy-now-pay-later (BNPL) also called POS financing or paying for purchase over time is a type of alternative financing solution that allows customers to use their credit card or an installment loan to buy a product and pay off that balance over time. Unlike traditional subprime lending solutions like rent-to-own, BNPL requires no down payment and has much lower interest rates, even zero interest for short-term loans. Best of all, it’s easy to apply and get approved! That’s because it’s not subprime at all; instead, it acts as just another line item on your credit card bill. Companies using BNPL usually offer high-ticket products such as furniture, workout equipment, and appliances, as well as gaining popularity around smaller ticket items such as Air Jordans or smartphones.

Are there any risks associated with BNPL products?

Before you embark on a buy-now-pay-later for that new iPhone, make sure you understand all of your risks and rewards. According to its proponents, BNPL is a financing option that suits many consumers’ needs, including those who can’t afford large purchases outright but don’t have credit available through traditional means. However, if you decide to take out a BNPL product, make sure you know exactly what could happen—and how it could affect your finances in both good and bad ways. If you want to determine whether BNPL is right for you, do your own research online and read reviews from past customers; other people’s experiences can be invaluable when it comes time to evaluate offers from different lenders. When using a rent-to-own strategy instead of shopping at big-box retailers or similar outlets, consider these important questions: How will these products help me in my present financial situation? What should I look for when comparing lenders? How should I go about comparing lease options from different vendors? What happens if something goes wrong with my purchase or lease agreement? We can help! Contact us today for more information about our services!

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