Getting a loan to pay rent: preference or desperation?

Americans spent about $160 billion through pay-later loans last year, nearly twice what they spent in 2023, according to research from Federal Reserve economists. The loans started as a way to split up online shopping, and now they cover electricity, phone bills, dental work, tax bills and, increasingly, rent.

The industry frames this as customers picking a product they like, but consumer advocates are calling it a symptom.

Half of pay-later borrowers said they couldn't make ends meet otherwise, according to a long-running survey by LendingTree, and a quarter said they'd carried three or more of these loans at the same time. Flex, which has financed nearly $40 billion in rent payments for 3 million tenants, reports that its median customer has a credit score under 600, squarely in subprime territory.

What financing your rent actually costs

Flex charges a $6 monthly fee plus 3% of whatever you borrow, and a processing fee on top of that. Run those numbers against real rents and you can see the fees per month.

On the typical US city rent of $1,859, financing every month runs about $741 a year, which is roughly 40% of one month's rent spent. Two caveats here, since only about a third of Flex customers borrow every month, and we left the processing fee out because it isn't published, so these figures are the floor prices.

The fee also isn't as small as it's designed to feel. Paying $61.77 to move $1,859 forward by a few weeks works out near a 40% annual rate if you keep doing it, which is credit card territory for people who mostly can't get a good credit card.

Ryan Metcalf, who handles public affairs for Flex, doesn't really dispute the underlying picture. "We can't solve income, or the price of rent and affordability," he said. "What we can help people solve is a timing issue. It's harm reduction."

That deserves to be taken seriously, because a missed rent check brings late fees and can start an eviction, so a $60 charge is sometimes the cheaper mistake. Lauren Saunders of the National Consumer Law Center put the counterargument simply, saying the loans "address the real need that people are short of funds, but just adding fees to their monthly budget and leaving them short next week is not the answer."

The debt nobody can see

Most pay-later lenders don't report to credit bureaus, so hundreds of billions in household borrowing sits outside the credit system entirely, and analysts call it phantom debt. FICO announced new scores that would fold in pay-later data back in mid-2025, and more than a year later there's still no release date, because the lender data isn't reaching the bureaus at the scale the models need.

That blind spot matters for renters twice over. A tenant building a payment history through these loans gets no credit for it, and a landlord screening applicants can't see the obligations either. Meanwhile the Federal Reserve Bank of Richmond has called the systemic risk limited while warning those risks could grow if left unchecked.

So the honest answer to preference or desperation is both, in very unequal measure. Some borrowers really do prefer fixed fees and short terms to a credit card that moves its interest rate on them, and most of the growth is coming from people financing the one bill they can't skip.

We covered the regulatory side of this in Congress targets rent now, pay later services, and the cheaper comparison in paying rent with a credit card.

Sources

• The New York Times, Getting a Loan to Pay Rent? (August 17, 2026), for the lender fees, quotes and product expansion

• Federal Reserve, Buy Now, Pay Later Beyond Pay in 4 (June 5, 2026), for the $160 billion figure

• LendingTree buy now, pay later survey, for borrower share and loan stacking

• RentDataNow city rent data, anchored to the Zillow Observed Rent Index, June 2026