Critical Things To Know About Rent To Own Scheme

Rent to own is also called as a rental purchase scheme where a lessee can purchase the leased item at any time during the agreement. Rent toown concept first appeared in the United States during 1950s and subsequently gained popularity in the United Kingdom & Europe. The usage of rent to own transactions is mostly associated with consumer goods such as consumer electronics, furniture, home appliances and in certain cases with automobiles as well. However this term is also used in connection with real estate transactions.

Rent to own transaction differs from a lease agreement, the major difference being that the lessee can purchase the leased item at any time during the agreement in the case of rent to own transaction. Rent to own agreements are based on a weekly or monthly rental terms. Response from the consumers has been overwhelming in the United States. Here the consumers elect to engage in rent to owntransactions for various reasons, such as “the convenience and flexibility of the transaction”, “the lack of a credit check” and “the ability to use the merchandise they otherwise could not afford”. The major reason for dissatisfaction amongst consumers is the “high prices”.

In the rent to own transaction, the consumer or lessee, at the end of each week or month, can opt either to renew the lease on a weekly or monthly basis by making regular renewal payments, or to terminate the agreement with no further obligation by returning the property. Though the consumer is not obligated to do so, he can choose to continue making regular interval payments on the product or merchandise for a pre-specified period of time, at which point they would own the good outright. An alternative purchase option is also available to the consumer, allowing him to pay off the remaining balance on the agreement at any point in time in order to obtain permanent ownership.