First it was vacations, then Uber Eats orders, and now rent. Apparently there’s nothing these days that you actually have to pay for upfront.
Driving the news: Buy now, pay later (BNPL) companies like Affirm and Flex are now offering rent-splitting loans, allowing customers to divvy up their rent into smaller payments over the course of a month. Three of these companies told the Financial Times that the number of people seeking out these loans has grown rapidly.
Flex, which launched in 2019, has already processed US$37 billion in rent payments and now has ~1.5 million monthly customers.
In Canada, fintechs like Zenbase offer a similar service, letting customers split monthly rent into two payments (for a fee, of course). Other BNPL services have already taken off — Klarna saw its Canadian user base nearly double last year.
Why it’s happening: The fact that there’s this much demand for a service that essentially finances rent like a mortgage speaks to the affordability challenges facing many renters, particularly people with inconsistent pay schedules like freelancers and gig workers.
These lenders say they’re providing flexibility to these types of workers, while consumer advocacy groups argue that the hidden fees and high interest rates can trap them in a cycle of debt.
If a borrower misses a payment, some platforms will charge late fees, interest or cut them off entirely until the loan is paid back in full.
Why it matters: Whether it’s a Chipotle burrito or rent, BNPL is making it easier for people to buy stuff they can’t really afford. As Canadians fall behind on credit card and mortgage payments at rates not seen since the aftermath of the 2008 financial crisis, easy-to-get loans wrapped in fun packaging may be setting up precarious borrowers for even more money trouble down the road.—LA
