Nikhil's dream job is to be an exotic car salesman. His favourite colour is orange and it shows as he is the 23 year old entrepreneur behind ProAdviser. You should follow him, he gets lonely.
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Sometimes, things just happen – the refrigerator suddenly starts freezing everything, your computer dies or the “ex” moves out, taking the TV with them. When these kinds of things happen and you’re low on fund, what do you do?
Late Night Advertising is Calling to You
You’ve probably seen the late-night TV ads or heard the catchy jingles on the radio. Lease and rent-to-own (RTO) services seem to be hypnotising you with their promises:
- Low monthly/fortnightly payments
- Low price guarantee
- No credit/pre-approved
- No payment for 30 days
- Flexible lease terms
- Early buyout option
Any of those “benefits” can be pretty appealing, especially right now. But before you check out lease/RTO options, let’s look at some of “deals” and see if they really can benefit you.
Leasing and RTO – What’s the Difference?
When you lease an item, you don’t own it. You will make payments on it, at set intervals, for the term of the lease. When the lease expires, you may:
- Return the item
- Keep the item, renew the lease
- Work out a purchase deal (at an additional cost)
- Trade the item in for a new model, start a new lease
Rent-to-Own is exactly that: you rent an item for a specified period of time and when the last payment is made in full, you legally own that item.
Luxury vs. Necessity
For most people, it will be extremely difficult to do without a properly working refrigerator or stove. A refrigerator may be considered a necessity.
A computer or a TV may not be necessity in the short term. Someone may be willing to let you borrow a computer. Replacing a washer might be a greater financial hardship than temporarily doing laundry at the local laundromat. And a TV is not one of the key elements essential for sustaining life.
Watch Out for the Fees
Although the terms of RTO or leasing may seem very reasonable, look more closely.
- Hidden fees are fees not mentioned in the ads like account-keeping or setup fees, late payment fees or fees if the item is damaged or stolen.
- Interest rates may be much higher. You can wind up paying considerably more than the product is worth.
Consider Safer Alternatives
Hidden fees and high interest rates won’t help you save money toward replacing an essential item. What safer options might you have?
- Save your money. Review your budget for ways you might be able to reduce some of your spending; place those savings aside for your purchase.
- You might qualify for a Saver Plus or an Adds UP savings plan if you are a low-income earner.
- Lay By is a service offered by many companies. It allows you to make payments toward the purchase of a product for a nominal fee. The company will not charge interest or late fees but you may not take possession of the item until you have made all the payments.
- Apply for a Low-Rate loan. You may qualify for a low or no-rate interest loan if your purchase is a necessity (such as a refrigerator). The government offers NILS (No-Interest Loans Scheme); StepUp low-interest loans are funded through community providers.
If you believe a lease or RTO is your only option, carefully read ALL the terms and conditions of the contract before you sign it. Make sure you have enough money to make your payments in full and on time – every time. Explore all other safe options, first. Sometimes, there is something or someone ready to help you if you will just ask
We only explored a very basic financial option. When you need help with the the sophisticated stuff like Self Managed Superannuation, be sure to use ProAdviser.com.au. Submit your details and we will put you in touch with trusted financial planners. To get started just click here, it is free!
By Nikhil Sreedhar
Nikhil is the CEO of ProAdviser. He is an experienced financial services professional with a particular interest investing in small businesses, shares and property. ProAdviser is a specialist professional adviser marketplace that connects consumers to leading financial planners
, broker, accountants and lawyers. It is completely automated, efficient and highly effective. To get started simply click on “Ask An Adviser”
finance advice, Financial Advice, Financial Advisers, Financial Blog, Leasing, Nikhil Sreedhar, Rent to own, RTO