Explore These Options to Pay Rent in Instalments to Ease Your Financial Strain

Paying your rent after the due date can lead to extra charges, losing your place to live, or being asked to evict the place. But recently a more flexible option has been introduced to renters. Split your rent into two payments, and also build your credit score doing that. One may choose a suitable date for the second payment, but the first payment would still be due on the first of each month. Potential advantages include on-time rent payments, improved cash flow management, and an opportunity to improve one's credit history. This arrangement is similar to the "Buy now, pay later" plans frequently observed in retail settings. These plans help with financial planning by allowing the expense of a purchase to be spread out over time and usually without incurring interest. However, the notion of needing to split rent payments to afford housing, a fundamental necessity, raised concerns about potential financial strain for some renters.

A Tightening Grip on Americans' Finances

In America, a record 22.4 million renters in 2022 spent more than 30% of their income on rent and utilities, according to research published in January 2024 by Harvard University's Joint Center for Housing Studies. What is even more concerning is that 12.1 million of these renters were at an all-time high of 50% or more of their income going toward housing costs. Federal rules classify these renters as "cost-burdened," or in extremely severe circumstances, as "severely cost-burdened." Living with such financial pressure means having to make difficult choices every day. Is paying your rent more important than getting groceries or going to the doctor?

Financial consultant Joanne Danganan frequently meets clients who spend more than forty per cent of their income on rent alone in cities like Los Angeles, which is notorious for its expensive rental prices. As a result, every dollar in their budget is carefully spent, occasionally even going over budget. “It all boils down to the simple math of how much you earn versus how much you spend,” she explains. “If the balance at the end of the month is negative, it's a clear sign that you're stretching your finances too thin.”

Instalment Rental Payment Options

Businesses such as Flex, Best Egg, and Jetty see themselves as part of the answer to the problems associated with renting. For example, Flex offers its line of credit in partnership with thousands of rental establishments nationwide. By enabling tenants to make smaller, more manageable rent payments, they hope to lessen the financial burden of rent.

Senior vice president of marketing at Flex, Kala Nicholson, highlights the value of their service in assisting tenants in navigating the intricacies of the rental market. In essence, Flex operates as follows: qualified people can apply to these companies for a loan or credit line; approval typically requires the property manager's consent. If approved, the company covers part or all of the rent on the first of the month using the line of credit or loan. Then, tenants repay what they borrowed in one or multiple instalments by the end of the month.

The service has expenses even though there isn't any standard interest. Tenants would be required to pay a $14.99 monthly membership fee in addition to 1% of the total rent as a bill payment cost, per an email they got from their apartment. For example, if the rent is $1,500, the costs will come to around $30. If Flex is repaid in 25 days, the annual percentage rate comes to about 29%, which is just less than the 36% maximum that consumer advocates deem reasonable for loans.

Furthermore, if renters make their payments on time, some of these businesses record their payment histories to credit bureaus, which could raise their credit scores. According to certified financial counsellor Joanne Danganan, these products could be useful for tenants who have adequate money for rent but have trouble managing their cash flow, like gig workers who receive inconsistent pay. She issues a warning stressing that these remedies should only be considered as short-term aids that tenants hope to outgrow rather than as permanent fixes gradually.

Other Practical Solutions 

Paying your rent in instalments may not assist much if you're having trouble making ends meet and may even make matters worse by adding additional costs. If the employer reports you for missing payments, that might also lower your credit score. Take into consideration reevaluating your revenue and expenses rather than depending on borrowing. Joanne Danganan advises looking into possibilities such as finding a roommate, selling extra stuff, or taking on a side job.

Jeremy Lark from GreenPath suggests getting in touch with your landlord or property management right away if you're still having trouble paying your rent. If you've been paying on time in the past, they might be more lenient than you think. Some may even provide flexible payment plans without levying additional costs.

For additional support, resources from the Department of Housing and Urban Development and 211.org can be helpful. If you need rental assistance and don't know where to start, nonprofit credit counselling agencies can guide you in exploring available options.