Why should I think twice about buying from a ‘pay weekly’ store?
They can cost you more in the long term
Items from pay weekly stores often cost double the price than items bought outright, sometimes more. The interest rates are high – often over 50% APR – and because the payments are usually spread over three years, this can add up to a lot. On top of this, the up-front price of the goods is often a lot higher than comparable items in other shops.
For example, a washing machine sold for £295 at a big-name high street retailer could end up costing you over £1,000 at a pay weekly store, once insurance and interest payments are added.
You might have to pay additional insurance
If you don't have home contents insurance, these stores may also try to sell you their own cover in case the item is damaged or stolen. This insurance can add a large cost over the length of the agreement, in addition to what you’re already paying for the item. In many cases it costs less to pay for contents insurance that covers everything in your home, rather than just the one item.
You don’t own the items until they’re fully paid off
The type of credit agreement used by most rent-to-own is hire purchase. This means you don’t legally own the goods until you’ve made the final payment under the agreement.
If you fall behind on the payments for your goods the store can take them back from you, although in most cases they’ll need a court order before they can do this. If they do repossess the items you won’t get back any of the payments you’ve already made.
You’re also not allowed to sell the goods or use them to take out credit with a pawnbroker until you’ve made the last payment. If you do this you may be committing a criminal offence because the goods aren’t legally yours to sell or pawn.
However you do have a legal right to hand back the goods whenever you want. As long as you’ve paid half the money owed under the agreement and the account has not defaulted, there’ll usually be nothing further for you to pay.
You can get caught in a pay weekly loop
Agreements for payment store goods are usually over three years, so once you’ve paid the finance back you might be at a point where you need to think about replacing them. If you’re still on a low income, you may be tempted to take out more weekly pay items because you’ve become used to them. Over time, this could cost you thousands of pounds.
This temptation to can be harder to resist if you visit the store to make your payments. Often the sales staff will tempt you into getting more items you might not need. If you’re trying to budget carefully, see if the supplier will agree to payments by Direct Debit so you can avoid this.