white pound signs on a provident green background

Picture the scene… your freezer has packed in and there’s water everywhere, not to mention food you can no longer eat. To make matters worse you can’t afford to replace it. You decide to use rent to own, where you could get the same freezer but pay for the item weekly until you at last own it.

The problem is, not only are you paying for the item and interest, but some rent to own businesses may charge you additional costs such as insurance and service cover.

What Is Rent To Own?

Rent to own is where you ‘rent’ a product. It’s in your home and you use it just like any other item. The only difference is that you make repayments either weekly or monthly for it until you’ve paid off the money you owe. When your repayments have been paid on time and in full, you own the product. If you’re unable to make repayments, the item can be repossessed.

As part of the rent to own process, you sign a conditional sale credit agreement. This is a document which details the item you are renting, the amount you’re paying and your repayment schedule. This includes interest and any extra charges you’ll be paying such as administration fees or insurance as well as listing all the rules and regulations around your agreement. It will also include a term that should you fail to meet all your repayments the item can be repossessed.

How Much Do I Pay?

Attention around rent to buy has recently focussed on how much customers actually repay.
What’s more, there are additional charges added to repayments, including insurance (which is often mandatory) administration fees and service fees. Together with interest, the cost of repayments shoots up.

This is exactly why the All Party Parliamentary Group on Debt and Personal Finance have been calling on the FCA for tighter regulations.

What Are The Pros?

Rent to own offers customers who cannot afford a big expense a way to get the items they need and repay them weekly. companies such as BrightHouse, Perfect Home and Buy As You View offer top brands and the convenience of being able to get what you want, when you want it.

What Are The Cons?

Rent to buy gives you a limited choice of brands and features. It also means you can’t shop around to find the best deal, so can’t take advantage of sales or bargains like ex-display models.

As your repayments include administration fees and insurance, you pay back a lot more. Plus, even if you’ve made repayments to the value of the item, if you miss repayments your item could ultimately be repossessed.

To top it off, are additional fees such as insurance, which is often mandatory, which ensure repayments are high.

Your Rights

Before you sign a credit agreement, you must be given a pre contract agreement and an adequate explanation which tells you:

  • Product details
  • The interest rate on your agreement
  • How you’ll make repayments and how much you repay. This also includes information on the amount of each repayment and when these will be due.

Note: You can cancel your agreement within 14 days, but you must tell the lender. Once you cancel your agreement, you’ll have to return the product and if you paid a deposit, you’re entitled to a full refund.