Pay-later loans now cover your rent, and critics are worried

Buy now, pay later is moving from sneakers and gadgets to the rent check. A new group of financial technology companies is offering to split monthly rent, and other bills, into smaller payments. Supporters say it helps renters dodge late fees. Critics say it can push people who are already stretched further into debt.

What changed

Pay-later lending has mostly meant financing at retail stores. Now several companies see money in rent, utilities, medical care and phone service. They say rent keeps rising faster than incomes.

• RealPage, an apartment software firm, owns Livble and also offers Flex in its app.
• Flex, based in New York, lets people split rent, mortgage or other bills.
• Bilt gives points on rent through its co-branded credit cards.
• Zip, based in Sydney, splits bills and is exploring a rent service for the U.S.

Why companies see a big market

Zip says monthly rent and bills are a $2 trillion opportunity in the U.S., compared with $160 billion for retail pay-later. Its U.S. CEO, Joe Heck, points to a timing gap. Most people are paid every two weeks, while rent is due monthly.

RealPage's Zahir Khoja says the goal is to help renters who are short on the first of the month but can pay later in it. He says that beats an average late fee of $85 or credit card rates of 30% or more.

What critics say

Consumer advocates are not convinced. Ariel Nelson of the National Consumer Law Center says these products appeal because "people are desperate." Protect Borrowers, a nonprofit, called them a repackaging of payday loans in a February report. About 109 million Americans pay rent, the group says. Advocates also warn that borrowers can end up stacking one debt on another.

What it costs

Fees differ by company. Livble charges a flat fee per payment, typically $30 to $35, which varies by state. It does not post fees on its website. A RealPage spokesperson says renters will always see the fee before it is final. The company did not immediately answer how it shows fees to customers.

Flex works as a subscription and takes a percentage of the rent. Flex also accepts credit cards, while Livble takes only ACH, which is a bank-to-bank transfer.

What to check first

A fee of $30 to $35 on a single payment can add up if used every month. Compare it with your landlord's late fee and your other options before signing up.