The function of rent to own is to allow future buyers to rent property or furnishings, for either business or personal use, until they are able to provide the capital to purchase the property.
The process can involve furniture and appliances or real estate property. When associated with real estate a lease agreement and purchase agreement are usually present. Furnishings and appliances are usually rented for a monthly fee, plus interest. The rental agreement includes an option to buy the furnishings or appliances.
Renters with poor credit are able to secure property or appliances they need, but at the same time pay down a part of the property's worth. This is beneficial to sellers who are unable find outright buyers.
Buyers could lose fees and interest if they choose not to purchase. Sellers run the risk of buyers opting not to purchase.
The United States Defense Department has determined that rent to own can be a predatory lending practice similar to payday loans and tax refund anticipation loans. Consumers should consider the total cost of an item before agreeing to a rent to own contract.
