After the Mortgage Crisis in 2007 and the subsequent economic recession, easy credit became a thing of the past. While it was once quite an easy process for applicants to get high-limit credit cards and loans, banks became extremely hesitant to hand out loans to anyone except the most qualified borrower. As a result, the rent-to-own furniture and appliance stores such as Aaron’s became a great alternative for those with less than desirable credit as it allowed them to make payments on a large purchase without a bank loan.
Yet, while it seems like a great idea to many, it can end up being a headache and can lead consumers to pay much more than retail prices. To help consumers decide if renting to own is the right option for them, below is an analysis of the pros and cons of using a service such as Aaron’s.
Cons
For many with bad credit who crave the comfort of new furniture, renting to own may sound too good to be true and in many cases, it is.
High Interest: One of the biggest drawbacks to using Aaron’s is that if a customer chooses more payments to have a cheaper periodic payment, they will be paying far more than the value of the item during the course of their “loan”. In this sense, renting to own is an awful investment and it would definitely be a more prudent option to save up and pay the full retail price up front. While there is no true interest rate as a rental agreement through Aaron’s is not structured like a loan, if one were to calculate what the interest rate would be given payments and the actual retail price, it could easily be over 100%.
Credit Stagnation: Another drawback for the rent to own option is that while a customer is making payments, they are doing nothing for their credit as these businesses do not report them to credit agencies for late or stopped payments. The worst thing someone with bad credit could do for their credit, other than defaulting on a loan, is not actively improving their credit. A better option than renting to own might even be using a “secured” credit card in which a small cash deposit is required to establish a credit line, and using that card to buy furniture and pay it off, which would be great for one’s credit — granted they make timely payments on the card.
Pros
Take It Home: One of the strongest draws to patronizing an Aaron’s store is that the rent to own option is great, simply because getting to take quality furnishings home without having to eliminate your savings account is a great feeling. While instant gratification may not be the wisest end game financially, it is still a strong motivator for many. And in actuality, if one chooses to arrange fewer, more expensive payments, the total amount they pay for their furniture may be only slightly higher than retail prices.
No More Bad Credit: For those afraid of ruining their credit, failing to pay the rental payment does not appear on one’s credit report and only results in the store repossessing the furniture. This is good for anyone who has uneven employment and may know in advance that they may not be able to always may their payments.
Flexibility: Aaron’s is known for its flexibility in payment dates, amounts, and even missed payments so for those in unsettled living situations like a travel-heavy job or uncertain long-term residency, renting to own can provide an easy-out in case your circumstances change. Returning items is a very easy process and so for those looking for a short-term arrangement, Aaron’s may be the best.
Conclusion
In short, Aaron’s may not be the smartest move financially in the long-run, but for those in need of short-term flexibility or with bad credit and a high standard of living, it can be a very workable solution. The only other thing to know is that Aaron’s employees are trained to up-sell and they often get customers to rent much more than they need. Happy shopping!
Appliance rental may not be for everyone, as you say, but it’s certainly a good option for some people. Those with bad credit may certainly find it to be a useful solution when they might otherwise find it difficult to get a new appliance. Combine that with the flexibility of payments and it becomes a very viable option. Thanks for the interesting article.