Renters use 'rent now, pay later' services to manage monthly payments, but fees raise concerns

NEW YORK (AP) — Rent tin devour up an full paycheck astatine the commencement of the month, truthful a increasing fig of renters are turning to a fiscal merchandise that promises alleviation by letting them divided the measure — for a price.

So-called “rent now, wage later” services person emerged implicit the past fewer years arsenic housing costs climb and paychecks turn little predictable, peculiarly for lower-income and gig-economy workers. According to the Bureau of Labor Statistics, rents person jumped astir 28% successful past 5 years.

Companies specified arsenic Flex, Livble and, much recently, Affirm, accidental breaking rent into aggregate payments tin assistance renters negociate currency flow. But user advocates pass the products typically relation similar short-term loans, layering fees onto already strained budgets and, successful immoderate cases, carrying triple-digit effectual involvement rates — raising questions astir whether they easiness fiscal unit oregon deepen it.

Kellen Johnson, 44, started utilizing Flex to divided up his rent payments astir 2 years ago. Instead of paying the full $1,850 of his rent connected the archetypal of the month, Johnson would wage $1,350 connected that date, and $500 connected the 15th. For the service, Flex collected a $14.99 monthly subscription fee, arsenic good arsenic 1% of the full rent, which for Johnson was $18.50, bringing his monthly charges for the app to much than $33.

Johnson said helium was consenting to wage the other costs successful portion due to the fact that helium worked arsenic an independently contracted transportation idiosyncratic for Amazon astatine the time, and his paychecks could vary.

“It was an disbursal that I was incurring, but I went up arsenic it was much convenient,” said Johnson, who present works arsenic a operator for elder citizens successful Sacramento, California.

Roughly 109 cardinal Americans, oregon astir 42.5 cardinal households, are renters successful the United States. The Census Bureau estimated successful 2024 that a ample stock of those households wage 30% oregon much of their monthly income connected rent. The bureau considers specified households to beryllium “cost burdened,” meaning rent consumes truthful overmuch of their income that they person little quality to program for aboriginal expenses oregon physique wealth.

Rent now, wage aboriginal services mostly run the aforesaid way: The institution pays the landlord the afloat rent erstwhile due, and the renter repays the institution successful 2 oregon much installments implicit the people of the month. Because rent tin beryllium specified a ample expense, the companies reason that spreading payments retired tin springiness renters much currency connected hand.

Many of these services travel with fees. The fees tin beryllium structured otherwise but should beryllium mostly thought of arsenic outgo of credit, user advocates warn. In Johnson’s case, helium was paying $33.49 for a two-week indebtedness of $500, for an effectual yearly percent complaint of 172%, erstwhile expressed utilizing modular consumer-lending calculations.