Rent can eat up an entire paycheck at the start of the month, so a growing number of renters are turning to a financial product that promises relief by letting them split the bill — for a price. So-called “rent now, pay later” services have emerged over the past few years as housing costs climb and paychecks grow less predictable. That’s where companies like Flex, Livable and Affirm come in. They say breaking rent into multiple payments can help renters manage cash flow, but consumer advocates warn that their services function as short-term loans that layer fees onto already strained budgets and, in some cases, carry triple-digit interest rates. For example, Kellen Johnson started using Flex to split his rent payments about two years ago. Instead of paying the entire $1,850 of his rent on the first of the month, Johnson would pay $1,350 on that date and $500 on the 15th of the month. For the service, Flex collected a $14.99 monthly subscription fee, as well as 1% of the total rent, which for Johnson was $18.50, bringing his monthly charges for the app to $33.49. With Johnson paying $33.49 for a 2-week loan of $500, he was effectively paying an annual percentage rate of 172%. Johnson said he was willing to pay the extra costs because he worked as an independent contractor and his paychecks varied. “Renters should be skeptical of any financing providers that have partnered with a landlord,” said Mike Pierce, Executive Director of Protect Borrowers.
