Las Vegas Review-Journal

Installmen­t plans divide up rent, but fees drive up costs

- By Jackie Veling

In January, I received an email from my apartment complex saying that I could divide my monthly rent into two payments via a product called Flex.

I would make the first payment on the first of the month, but I could choose when to make the second payment. According to the email, this would help me pay rent on time, improve my cash flow and even build my credit history. Enticing, right?

It sounded familiar. “Buy now, pay later ” plans, popular in the retail industry, operate similarly. With buy now, pay later, you pay for a purchase over a series of installmen­ts, usually with no interest, which can help manage the expense.

But needing to divide up a payment to afford something — especially on a line item as crucial as housing — could spell financial trouble for some renters.

Current state of rent

In 2022, a record 22.4 million renters spent more than 30 percent of their income on rent and utilities, according to a January 2024 report from Harvard University’s Joint Center for Housing Studies. Of those renters, 12.1 million spent a staggering 50 percent or more, an all-time high.

By federal guidelines, these renters are considered cost-burdened (or severely cost-burdened, in the case of the 50 percent spenders). To be cost-burdened is to live in a world of limited choice. Should you pay rent or buy groceries or go to the doctor?

“How much are you making versus how much are you spending?” Joanne Danganan, an accredited financial counselor in Los Angeles, said. “If the math at the end is a negative number, you’re spending way too much.”

Installmen­t plans for rent

Companies such as Flex, Best Egg and Jetty position themselves as part of the solution. Flex partners with thousands of U.S. rental properties to offer its line of credit, which it says can help soften the blow of rent with smaller payments that are easier to manage.

“By providing flexibilit­y over the most significan­t recurring expense for most people, Flex is an important and valuable solution for renters navigating the complexiti­es of the current and evolving rental landscape,” said Kala Nicholson, senior vice president of marketing at Flex, in an email.

Here’s how it works. You can apply for a line of credit or loan from one of these companies if you’re eligible — usually, your property manager must agree. If you’re approved, the company pays part or all of your rent on the first of the month by tapping the line of credit or loan. Then, you pay back what you borrowed to the company in one or more installmen­ts by the end of the month.

You won’t pay interest in the traditiona­l sense, but the service isn’t free. The email from my apartment says I would need to pay a monthly membership fee of $14.99, plus a bill payment fee of 1 percent of my total rent. If your rent is $1,500, that’s about $30 in fees. If you repay Flex in 25 days, that’s an annual percentage rate of about 29 percent. Consumer advocates consider 36 percent to be the affordabil­ity ceiling on interest for a loan.

Some companies also report payment history to the credit bureaus, which can help build your credit score if you pay on time.

Alternativ­es to plans

If you don’t have the money for rent, paying in installmen­ts won’t help. It can even hurt because the fees make your rent more expensive, and failure to repay the company can lower your credit score if the company reports missed payments.

Instead, look at your earnings versus expenses and consider adjustment­s. Picking up a side hustle, selling stuff you don’t need or getting a roommate are better solutions than financing, Danganan says.

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