Consumer Loan Versus Rent

Consumer Loan Versus Rent-to-Own

Example:  A local electronics store was selling the television Chris wanted for $500.  A nearby rent-to-own store advertised the same model for $15. a week.  The manager told Chris he would own the television in 72 weeks.


Chris decided to purchase the television at the electronics store for $500.  He was able to obtain a 1-year installment loan with a 21% APR.

As shown in the table below, using a rent-to-own store would have cost Chris $1,080.  By obtaining a short-term installment loan, Chris saved $521.20 ($1,080 - $558.72 = $521.20).


Although $15 a week sounds affordable, it can actually cost you more in the end.


Consumer Installment Loan

Rent-to-Own

Advertised price = $500

21% APR for 1 year

$46.56 x 12 months = $558.72

Advertised price = $15 per week

 


$15 x 72 weeks = $1,080

 


 


 


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