Buy now, pay later rent? This is how this service would work
Paying the entire rent in one lump sum is often one of the biggest challenges of the month for millions of families in the United States.
Paying the entire rent in one lump sum is often one of the biggest challenges of the month for millions of families in the United States. Now, a system known for facilitating small purchases wants to expand into one of the biggest household expenses. The "buy now, pay later" model, popular for clothing and electronics, is beginning to be tested as an alternative to cover monthly rent. The fintech company Affirm, one of the largest in this type of financing, launched a pilot program that would allow some tenants to split their rent into two equal payments. Instead of paying the entire amount at the beginning of the month, the sum would be divided into two bi-weekly installments. The idea aims to offer greater flexibility to those who are paid every two weeks. This service is not available to everyone. Affirm explained that the program operates through a partnership with Esusu, a New York-based company that reports rent payments to major credit bureaus. According to Affirm, each application is evaluated individually. Only those deemed capable of "responsibly repaying" the loan are approved. "If a tenant applies through Esusu and is approved by Affirm, they can receive a 0% interest loan that is paid in two bi-weekly installments with no fees," the company stated in an email. “Esusu and Affirm are not offering interest-bearing loans as part of this program.” While it's not the first time BNPL has been proposed for rent payments, experts believe Affirm could have a greater impact. Adam Rust, director of financial services at the Consumer Federation of America, highlighted the company's reach. It's estimated that around 24 million people already use its services. “Affirm is one of the leaders in this space. Its reach is going to be different,” he stated. This new service is attractive because it allows large expenses to be divided into smaller, more manageable payments. A report from the Consumer Financial Protection Bureau (CFPB) revealed that more than 50 million consumers used at least one BNPL loan in 2023.In most cases, interest-free payments are offered in four installments.
However, it's not all advantages, and experts suggest taking certain precautions. Having several loans with different due dates can complicate money management.
“It’s easy to get lost,” warned Matt Schulz, chief consumer finance analyst at LendingTree. Late payments can incur fees and, in some cases, affect your credit history.
Affirm acknowledges that it reports its loan activity to credit bureaus. The company shares information with Experian and TransUnion. This means that paying on time could help your credit, but failing to do so can also damage it.
The risk is greater when it comes to housing. Rust warned about the potential impact on housing stability.
“You can see the problem of how debt could lead to a spiral that threatens a renter’s housing security,” he explained.
Paying rent with borrowed money is neither a common nor a simple practice. Schulz believes the system can provide short-term relief, but also create false expectations.
“They might feel they can afford a higher rent because they’re splitting it into several checks,” Schulz emphasized. “It’s quite a risky game.”
Even with the warnings, experts agree that this type of service will continue to grow. The pressure of the cost of living is pushing many to seek flexible options. Before opting to pay rent in installments, fully understanding the terms and the long-term impact can make the difference between temporary relief and a bigger financial problem.