If you’re short on cash and you need a fridge or furniture, you might be tempted at “rent-to-own” options. These are appliance and furniture stores that let customers pay for items over time by forking over a monthly amount. But Consumer Reports illustrates why this is a pretty terrible idea.
They break it down in the above video, but their money editor, Mandy Walker, puts it in pretty simple terms:
If these were loans, the equivalent interest rate would be between 50% and 150%. There’s lots of fine print in the ads and in contracts, and many consumers just don’t realise the full cost.
With a typical plan, you might make monthly payments for two years before buying the appliance at a listed cash price. Consumer Reports found that some of these plans end up costing consumers hundreds of dollars more over time than just paying for the item outright.
It’s a classic debt trap, and one that they explain more in the linked article below.