Rent-to-own is a concept that has existed for more than a decade. In this rent-to-own industry a person who has bought and moved to a new house will generally want to sell the old house that he or she owns. However, if the old house is in a place where majority of the people suffer with bad credit or perhaps the prospective buyers do not have the necessary cash for down payments, it may be difficult for the seller to sell the house. This is where rent-to-own comes in. Prospective buyers who have either bad credit or do not have ample cash for down payment can rent the house for a certain period of time and after the expiry of that period, the renter can, if he or she wishes to, buy the house. A part of the rent paid every month (or as per contract) goes in as a down payment. This same concept can also be applied to furniture, electronics and other goods.
There are some mediating salesmen who say that renters with bad credit history can actually improve their credit score by 6 or more consecutive timely rent payments. This is a false sales statement. Timely rent payments during the contract period by the renter are not reported to Credit Bureaus and hence, credit score never improves. However, if a renter fails to make rent payments on time, it is also not reported to the Credit Bureaus. So, defaults in rent-to-own home buying will not hit the credit score negatively.
Prospective renters will have the option of not buying the house after the end of rent contract. This allows the seller or the owner of the house to rent out the same house at an appreciated rate. However, once a renter gets into an agreement, the decided selling price and the rent gets locked and there is no way the seller can change it even if some other prospective buyer is willing to pay higher price and rent.
From Moneyinvestmentnews.com/ Posted by Mags
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