The due date is approaching, and you still have no money to pay your landlord? This situation gives a headache to about 15% of Americans who struggle to pay rent and are behind on their payments regularly. However, there are some payment options to consider so as not to face all the unpleasant consequences of delaying your rent payments.
If it becomes difficult for you to pay your rent, take a look at the best and worst financing options and explore some tips on how to pay rent on a tight budget. We've also outlined the safest payment methods for landlords to accept in 2023.
The consequences of late rent payments may range from late rent fees to even eviction. They are typically outlined in your lease, along with the procedure to be followed in case of late payment. But these aren't the only implications you'll face. There are some hidden and not-so-obvious effects that can impact your financial future. If your landlord or rent management company reports your payments to major credit bureaus, late rent payments are most likely to damage your credit score.
Although it's possible to get credit for the rent you pay, it's not a common practice. This is because you can only build credit when your payments are reported to major credit bureaus. Unfortunately, not all landlords or property management companies send your timely remittances to credit bureaus. Thus, if you want your rent to be an instrument for building strong credit, start by choosing a landlord who is signed up for a rent reporting service. Another option you can choose is to sign up for it on your own.
But keep in mind that not all credit scores use your rental tradeline information for calculations. Your rent payments can only be factored into some scoring models that are not commonly used, such as Vantage and FICO 9 and 10.
Have trouble paying your rent? Here are some of the best rent payment methods for tenants who find themselves in a financial crunch.
Let's spell it out on the spot: going into debt to cover mandatory expenses should be considered as a last resort. However, this option may work for you if other routes are unavailable or unsuitable in your situation.
To minimize possible risks, you need to choose the right loan product and make sure this extra debt matches your budget without overburdening it. Loans for paying rent can differ significantly in terms of their costs and repayment periods. Aim for the lowest possible interest rate and an optimal repayment term that makes your monthly payments affordable. Although it may be tempting to get a bad credit loan with guaranteed approval for the longest possible period to decrease your loan payments, it will result in a higher overall overpayment.
Assistance programs can help needy tenants to pay for their rental properties. If you face sudden unemployment or disability, benefits offered by the government can provide you with extra cash to get through tough times. Although it may require some time to apply, qualify, and get the money on hand, it's still a great way to cover mandatory expenses. Explain your situation to your landlord and ask for more time. After your check arrives, you will be able to cover your rent payment.
Additionally, you may look for some local assistance programs offered by nonprofit organizations and voluntary projects. Search for the available option on the Internet or visit local government offices, such as your town hall, city council, or representative's office.
By calling 211, you can get up-to-date information about local services that can help you get prompt assistance with your rent payments. The organization can also help you with paying bills, finding food, covering medical expenses, or getting disaster recovery near you. You can also visit the 211.org website to learn more about available options.
Subletting a room may be a smart way to make your rent payments more affordable. However, you need to make sure your lease allows this. Check the agreement or contact your landlord to specify the details. If everything is fine with your lease terms, find a roommate or offer your loved one or friend to move in together. This is how you can save money by dividing your rent payments by two.
If you have a valid credit card with a sufficient limit available, it may also be used to cover your monthly rent. However, this option is not the best one in terms of financial efficiency. This is because of the high interest rates that are often set on your credit card payments. However, if your card has a 0% APR promotional period, you can even save money on interest by repaying this amount before your promotional period ends.
Some services, such as Plastiq or Rent Track, can help you pay for rent by card even if your landlord doesn't accept this payment method. However, you will be asked to pay a modest processing fee of around 2.9% in exchange. Then, it will give your landlord a check on your behalf. The process is quite simple and consists of three steps:
You can also set automatic payments if you're going to use this rent payment method every month.
If your employer makes monthly contributions to your retirement savings account, it may be a smart solution to borrow money from it. This is just like borrowing money from your future self, so all the interest you'll pay over the loan life will go toward your IRA account. You can typically get up to $50,000 or 50% of your account's balance, whichever is less. The repayment terms may be anywhere between one and five years, making it a flexible financial solution. However, you should be aware of associated fees and keep in mind that such borrowing comes with lost profit.
If you have some money set aside for your future or big purchase, it may be a good idea to take a portion of it to make a rent payment. Although it's not always advisable, as it takes you away from your financial goal, it may be much better than burdening yourself with additional financial obligations.
If you need rent money urgently, start by asking your loved ones to help you handle an emergency. Although not all people may have the needed amount on hand to lend it to you, it's still worth asking. If possible, you can save money on interest and get a better deal with the convenient loan repayment terms.
Along with the best ways to help pay rent, there are also the worst options to avoid.
Some forms of debt are not designed for your long-term needs. Although they may provide emergency assistance, they come with high costs and short repayment terms. This makes them difficult to manage and often becomes a starting point of a debt cycle. Thus, options like payday loans or car title loans are not the best options for paying rent.
If going into debt is the only option you have to pay on time, consider loans at lower rates. Compare multiple offers from different lenders and choose the option with the best possible APRs.
Bounced checks will bring multiple problems. First of all, your landlord may be less willing to work with you in the future. Thus, they may not renew your lease or reject you if you ask for grace for late payments in the future. Another drawback is that you'll also face late rent fees on top of your initial payment. And keep in mind that bounced check fees will be applied, too.
Landlords often have some questions when it comes to collecting rent. The main difficulty lies in the need to provide convenient payment options for tenants without compromising safety. First things first: accepting cash, personal checks, or a direct deposit in your bank account is not a good idea. But what is? Here are some of the best ways to collect rent payments from your tenants.
A money order is a safe way to collect rent payments for a landlord. Unlike a check, this option will never be returned for insufficient funds. This is because a tenant must prepay the needed amount with a guaranteed payment method, such as cash or a debit card. Money orders are easy to get in banks, check-cashing and payday loan stores, or even grocery stores. However, tenants may be charged a fee by a money order issuer. Therefore, they don't like them much. But it's still a beneficial option for people who don't have a bank account.
If you're going to collect your rent payments via money orders, keep in mind that both your and tenant's names must be outlined there. This will ensure that only you can cash them.
Online rent payments are convenient for both landlords and tenants as they allow them to save time and manage remittances from any place. They also offer a high level of protection, making it a secure option. The most popular online payment methods include Venmo, PayPal, and Zelle. Learn more about the options they provide and choose the one that corresponds with your needs. To make your online rent collection easier, consider various property management platforms or rent collection apps. They allow you to keep information about all your payments and bank accounts in one place.
A certified check is a check that banks or other financial institutions assure with a stamp and signature. This certification means that a bank confirms that a tenant has the required amount in a bank account. However, keep in mind that this assurance relates only to the moment when the check was written. Although money banks put a hold on the check amount, some of them still don't do this. Thus, unlike with a money order, there's always the risk of a check return for insufficient funds.
A cashier's check is a secure payment method that is backed by a tenant's bank or credit union. Instead of writing a check against a tenant's money, they do this against their own funds. When a tenant comes to their bank or credit union to get a cashier's check, they agree to the money to be written off their bank account first. Then, a financial institution writes a check and names a landlord as a recipient. Therefore, cashier's checks can't bounce, and you will always get your funds on time. However, this payment method may not be convenient for tenants as it requires them to visit their banks regularly. However, some banks may offer cashier's checks online, making the process more convenient.
Even if you're in a tough financial spot, it's important to pay rent on time to avoid unpleasant consequences. Luckily, there are several ways to get much-needed assistance with your rent payments. start by those that provide free assistance by calling 211. If it fails, move to reviewing your savings account balance. If this option doesn't work for you either, consider low-interest loans or borrow money from your family members or friends. But when it comes to debt, make sure you can repay the money on time.
Also, keep in mind that personal communication is key to solving any problems. If you face a problem with paying rent, contact your landlord and be open about your situation. Most lenders are willing to help you get back on track and can give you more time to find the needed amount.
If you're a landlord, think about providing convenient and safe payment methods to make rent collection easier and faster for both sides. You may collect rent online, accept money orders, or go for certified or cashier's checks, depending on what option better meets your needs. Keep in mind that cash, personal checks, and direct deposit are better to avoid.