Like deferred payment for an apartment: rent now, pay later?

It’s a familiar sight for online shoppers. For example, the men’s suit his jacket is listed for his $150. But below the sale price is his second offer. With Affirm, Afterpay, or Klarna he is his four payments of $37.50.

In recent years, such “buy now, pay later” services have increasingly common in the US and Canada.companies like air canada When CIBCMore We jump on the bandwagon and offer a product that allows customers to spread the cost of purchasing airline tickets and credit cards over multiple payments.

But can the same model apply to rentals? That’s what a few financial technology companies rely on.

For a fee, Calgary-based providers like Zenbase and based in the USA to, pier When flex Allow renters to split monthly payments into two installments.

According to Koray Oztekin, founder and CEO of Zenbase, the idea is to create a space between when people get paid (often twice a month) and when their rent is due (usually the first day of the month). It is intended to address imbalances.

“Our mission is to give people complete control over how they manage their household expenses,” Oztekin said.

in high rent (and almost everything else), Oztekin believes the market for this kind of service is growing.

“We are not developers. We cannot solve the housing supply problem,” he said. “But at least we can give people an option they can use if it makes sense to them.”

Usage

According to Tal Schwartz, Senior Tech Product Manager, who writes the Canadian Fintech Newsletter, rent now pay later products are still fairly new, but there are generally several varieties.

Earlier versions of this product were typically aimed at landlords and built into property management software.

“So if a landlord wants renters to pay, this will be one of the checkout options,” said Schwartz, who is also the former director of research for the Canadian Lenders’ Association.

More recently, Schwartz says, other products have been introduced that work directly with tenants.

One was provided by Chroma Technologies, another Calgary-based company.

The user paid Chroma half the rent by the beginning of the month. The company then pays his landlord a month’s worth of rent directly, and the renter repays the outstanding balance to his Chroma on the next payday, said his CEO and co-founder Myles Shedden. I’m here.

The product was launched in February of this year and is in great demand, he said.

“But ultimately there was a fundamental problem with the business model: whoever can pay the rent doesn’t have to split it,” Shedden said.

Less than a year after its launch, Chroma decided to “scale back” its rent split service.

“Our credit losses are beyond the level our business can support,” said Shedden.

Oztekin isn’t worried about Zenbase’s future.

He said the company has a “very low” delinquency rate.

“You can think of this profile as people struggling to raise money,” Oztekin said.

“We’re just giving them a breather so they won’t default on other bills.”

User Beware

But when people find themselves in this kind of predicament, Scott Hannah, president and CEO of the Credit Counseling Society, doesn’t necessarily recommend resorting to borrow now pay later services.

If rent arrears are a one-off, he said, you can deal with it the old-fashioned way by asking your landlord for a grace period or asking your employer to pay your salary in advance.

He also recommends “watching” your budget to see if you’re overspending and seeking help from a credit counselor if you need it.

“Otherwise, you would set yourself up for a long relationship with an entity like this and set yourself up to pay an odd number of dollars, averaging between $120 and $240 a year, just for the privilege of paying the rent. said Hannah.

Grant Badgian, president of bankruptcy firm MNP, agrees.

He said that while a product to rent now and pay later might help some people, it could make things worse for others. He said he could go insane if he didn’t pay.

“Things can snowball. That’s the problem,” Bazian said.

what’s next?

While the “borrow now, pay later” approach is still in the “nascent” field, Schwartz predicts that these products will become even more popular in the years to come.

Padder, a platform for Toronto-based property managers to collect rent and process maintenance requests, plans to offer the option to rent now and pay later next month.

Billi, a Victorian-based money management app, is also considering a product that enables rent splitting as part of it. Long-term roadmap.

“We are confident that we will see many other well-known fintech brands starting to offer this service,” said Schwartz.

As for Zenbase, it announced earlier this year that it had raised $4.1 million in seed funding and plans to begin expansion into states beyond Prairie.

Oztekin said there are about 5 million rental households in Canada.

“We’re just scratching the surface, so there are a lot of people we work with. [in] for the next few years,” he said.