The True Cost of Alternative Financial Services
|Getting credit is not cheap. However, getting a bank loan is usually less expensive than the following alternatives:
Rent-to-own services let you use an item for a period of time by making monthly or weekly payments. If you want to purchase the item, your rental payments will be partly credited toward the purchase price. The store will set up a plan for you to rent the item until you pay enough to own it. If you choose not to purchase the item, you would simply be renting the item to be returned at the end of the rental period.
The store is the legal owner of the item until you make the final payment. If you miss a payment, the store can take the item back. If this happens you will not own the item, and you will not get your money back.
Rent-to-own agreements are technically not loans, so no interest is charged. However, the difference between the cash price (if you were to buy the item outright that day) and your total payment (the total of your rental payments over time) is like the interest you pay on a loan. Generally, using rent-to-own services is more expensive—sometimes much more expensive—than getting a consumer installment loan to buy the item.
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