Last Updated on 11/12/2024 by Rany Burstein
Renting can feel like a maze, but fear not! Where there’s a rental dilemma, there’s a financial product ready to save the day.
In today’s fast-paced rental landscape, there’s always a shiny new financial solution promising to make your renting dreams a reality. But with so many options out there, it can be overwhelming to know where to start.
That’s where we come in. Today, we’re serving up a comprehensive rundown of all the top financial products designed to streamline your renting experience and make securing your dream home a breeze. After all, if you’re shelling out thousands of dollars each year on rent, why not make every dollar count?
So buckle up and get ready to discover a world of financial tools that will make renting easier and help you make the most of your hard-earned cash. From alternative security deposit options to credit-building strategies tailored for renters, we have everything you need to navigate the rental market like a pro.
Let’s dive in and turn those rental dreams into a reality!
1. Renter’s Insurance
Renter’s insurance is a form of property insurance with two main aspects,
- Coverage for personal property losses and,
- Liability protection against claims from others.
Now, you might be thinking, “Do I really own anything worth insuring?” It’s a fair question. While it may seem unnecessary to insure belongings that may not appear particularly valuable, the reality is that the cost of replacing everything in the event of a disaster can be even bigger. Incidents such as fires, burglaries, electrical malfunctions, or vandalism can result in significant losses. You will be surprised how often neighbors can buzz in strangers or sleep with a lit cigarette on the sofa. Just not worth the risk.
Similarly, liability claims arising from injuries sustained within one’s residence or damages caused to others’ property by oneself or one’s pets pose significant financial risks. It involves covering medical expenses for an injured guest or legal fees resulting from a lawsuit.
Some reputable renters insurance providers include Lemonade, which offers coverage starting at $5 per month, and established companies like State Farm, with rates beginning at $11.00 monthly. Plus, the higher the coverage, the higher the premium. So your rates will adjust accordingly.
For eg, with Lemonade, for an average New York apartment with a $9.50 monthly fee, you get comprehensive coverage:
- $25,000 for loss of personal property in case it’s stolen or damaged
- $100,000 for legal expenses if you’re sued
- $1,000 for medical bills for injuries at your property
- And $7,500 in case your place becomes unlivable and have to move to a temporary accommodation
2. Alternatives to Security Deposits for Renters
Most landlords require an entire month’s rent as a security deposit. That is a lot to budget for your moving costs. And if you are not in the mood to dish out an entire month’s rent in one sitting, check out such security deposit alternatives.
Surety Bond
Surety bonds work as a three-way insurance agreement between the landlord, the renter, and the surety, a.k.a the company. Instead of forking over a hefty sum, you pay a minimal monthly fee—think $5 to $13—to a surety company. This covers you and your landlord for things like unpaid rent or damages, just like a traditional deposit. The bonus? No need to break the bank with a lump sum upfront.
Companies that offer security deposit alternatives are Jetty, Rhino, and Obligo, each with its own pricing and process. But the essence is the same, i.e. smaller, manageable payments over time instead of a big deposit at the start.
To Note: Traditional deposits are usually refunded if your place is damage-free, these alternatives often have non-refundable fees. And remember, you’re still responsible for any damages, so take care of your place!
Guarantor
Opting for a guarantor is another route to sidestep the need for a security deposit altogether. However, it tends to be a pricier option compared to surety bonds, as it offers broader coverage.
Guarantors not only cover potential damages but also extend their financial backing for missed rent payments. This means landlords have an additional layer of security in case rent goes unpaid.
It’s worth noting that many renters choose a guarantor over a surety bond primarily to meet the qualifications for rental listings they otherwise wouldn’t qualify for. By leveraging a guarantor’s financial backing, they can apply for listings that may have been out of reach otherwise.
3. Cosigner Services
Here’s the 411 on renting with a cosigner: Cosigners essentially vouch for you by signing the lease alongside you, assuming both the rights and responsibilities that come with renting. Whether it’s your Aunt Sue or a professional cosigning service, having a cosigner can be a game-changer when sealing the deal on your rental.
For first-time renters or those facing hurdles like a low credit score, securing a rental on your own can be tough. But with a cosigner in your corner, your application gains that extra boost, instilling added confidence in landlords and boosting your chances of approval.
Now, who can step into the role of cosigner? It could be a trusted family member or a reputable cosigning company. If it’s a family member, make sure they boast a solid credit score and earn at least five times the rent amount to reassure landlords of their financial stability.
As for cosigning companies, options like Isurent, The Guarantors, or Leap can provide professional backing to bolster your rental application.
4. Using Credit Cards to Pay Rent
Rent is the biggest expense every year, with thousands of dollars flowing out of your pocket annually. For many renters, this presents a valuable opportunity to earn rewards on an expense they are already making every month. Whether it’s earning points towards travel, cashback on everyday purchases, or other rewards, the benefits can add up over time and provide significant value.
Bilt World Elite Mastercard and the Ink Business Unlimited Card offer enticing benefits for renters with the lowest annual fee. However, some landlords may hesitate to accept credit card payments due to associated transaction fees.
If your landlord falls into this category, you can explore third-party services as an alternative. These services allow you to pay with a credit card, with the service then issuing a check to your landlord. Examples of such services include Plastiq and PlacePay. Keep in mind, though, that these services often come with additional charges, typically around 2.9%, making them a last-resort option in most cases.
Reward vs Fees
Now, when it comes to paying rent with a credit card, it’s essential to weigh the pros and cons carefully. On the plus side, you can earn valuable points, miles, or cashback rewards, all while building your credit history steadily over time.
However, the downside lies in the transactional fees, which can range from 1% to 3% of the payment amount. Moreover, failing to pay your credit card bill on time can negatively impact your credit score.
Ultimately, it boils down to a comparison between the rewards earned and the fees incurred. If the fees outweigh the rewards, credit cards are not worth it. Conversely, if the rewards offset the fees, it could be a savvy financial move. Just do the math!
Additionally, if you have an irregular income or anticipate difficulty in meeting credit card payments on time, it may be prudent to stick with the traditional method of writing a check.
5. Rent Reporting
The average credit score for a young American adult is 679, which is not the best. Most college students and young adults have trouble finding better places to rent due to their low credit scores.
Fortunately, there’s a straightforward and effective strategy to improve your credit score: making timely payments on your credit cards and, perhaps less commonly known, reporting your rent payments to the credit bureaus.
While credit card payments are automatically recorded by credit bureaus, rental payments typically aren’t. That’s where services like BoomPay and Self come into play. By enrolling in these programs, you ensure that your rent payments are reported to the major credit bureaus, potentially boosting your credit score over time.
Here’s how it works: BoomPay, for instance, charges a modest $3 monthly fee to report your rental payments to all three credit bureaus—Equifax, Experian, and TransUnion. On the other hand, Self offers a similar service, allowing you to report all utility and rent payments to the credit bureaus for a fee of $6.95.
6. Flexible Rent Payment Platforms
Juggling rent payments can be a real headache for both tenants and landlords, especially when income streams are inconsistent or payment schedules don’t align. It’s a frustration that nobody enjoys.
Thankfully, there’s a solution gaining traction: flexible rent payment platforms. Instead of shelling out the entire month’s rent in one go, tenants can opt for a bimonthly payment system, perfect for those whose income streams come in installments or rely on fluctuating earnings like tips.
Setting up a flexible payment system is a breeze, too. Landlords can easily coordinate with their tenants using accepted platforms like Till, Flex, or Splitit, among others. Tenants then have the freedom to choose a payment schedule that fits their income cadence.
Not only does this approach make paying rent more manageable and less of a financial burden, but it also ensures timely payments. And let’s face it—with payments rolling in like clockwork, the chances of facing eviction dwindle significantly.
In essence, embracing flexible rent payment platforms isn’t just about convenience—it’s about fostering smoother landlord-tenant relationships and alleviating the stress that often comes with managing rental payments.
In the wild world of renting, snazzy financial tools can be a game-changer. But let’s not forget the ultimate hack: sharing your apartment with roommates. Slash those expenses in half and double the fun! Still, whether flying solo or with a squad, arming yourself with a solid credit score, renter’s insurance, or a trusty guarantor is key. It’s the shortcut to navigating the rental market with ease and unlocking better places sooner and faster. Happy renting, savvy renters!