1. What is Rent-to-Own?

Rent-to-own is a payment agreement where the buyer makes regular payments to eventually own the property or item. Part of each payment goes toward the eventual purchase price.

2. How Does the Calculator Work?

The calculator uses the rent-to-own payment formula:

Where:

• \( Purchase\ Price \) — Total cost to own the item
• \( r \) — Monthly interest rate (as decimal)
• \( n \) — Number of monthly payments

Explanation: This formula calculates the fixed monthly payment needed to pay off the purchase price plus interest over the specified term.

3. Importance of Payment Calculation

Details: Understanding your monthly payment helps budget effectively and compare different rent-to-own offers to find the most affordable option.

4. Using the Calculator

Tips: Enter the total purchase price, monthly interest rate (e.g., 0.01 for 1%), and term length in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is rent-to-own different from leasing?
A: With rent-to-own, part of each payment builds equity toward ownership, while leasing typically doesn't lead to ownership.

Q2: What's a typical interest rate for rent-to-own?
A: Rates vary but often range from 0.5% to 2% monthly (6% to 24% APR). Always verify the rate in your contract.

Q3: Can I pay off early?
A: Many agreements allow early payoff, which can save on interest. Check your contract for any prepayment penalties.

Q4: What happens if I miss payments?
A: This varies by contract but may result in loss of equity or termination of the agreement. Understand the terms before signing.

Q5: Is rent-to-own always a good deal?
A: It depends on the terms. Compare total cost with other financing options and consider your ability to make regular payments.