Millennials are borrowing from startups to pay the rent

The high cost of living is leading millennial renters to take on debt

May.May 13, 2019 12:30 PM
Median rent nationally hit an all-time high of $1,006 a month in the first quarter of 2019 (Credit: iStock)

Median rent nationally hit an all-time high of $1,006 a month in the first quarter of 2019 (Credit: iStock)

Who needs payday lenders and their sky-high interest rates when startups are more than happy to issue loans to millennial renters just scraping by in the share-economy?

StayTony, Domuso, Till and Uplift are among the startups issuing loans to recent college graduates and those with irregular paychecks, with borrowing rates that are often under 20 percent, the Wall Street Journal reported.

The downside is that it may lead young renters to live beyond their means. Because cities often have steep costs of living, the loans can affect borrowers’ credit scores and pile on long-term debt. 

The crop of startups is entering the field as housing costs have outpaced wages. Median rent nationally hit an all-time high of $1,006 a month in the first quarter of 2019, the report said. That’s led some renters to loans. Outstanding consumer credit, which doesn’t include mortgage loans, exceeded $4 trillion for the first time last year.

Some companies offer loans as a backup. Till, for example, pitches its financing as a tool to avoid evictions. Data on defaults is difficult to source, but the “serious” borrower delinquency rate on unsecured personal loans was 3.6 percent in the fourth quarter of 2018.

Still, there are considerable risks in issuing debt to consumers with inconsistent income. One, Rentlender, has already restructured, and another, Domuso, has already tightened its lending standards and won’t issue loans to renters with subprime credit. [WSJ] — Meenal Vamburkar

Related Articles

With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Angel Oak Cos. CEO Michael Fierman and Flagstar Bancorp Inc. CEO Alessandro DiNello (Credit: Angel Oak, Flagstar, iStock)

Mortgage market dries up for unconventional home loans

A WeWork office (Credit: Alex Tai/SOPA Images/LightRocket via Getty Images)

WeWork offers rent discounts as incentive to secure long-term leases

Manhattan resi listings continue nosedive: report

Manhattan resi listings continue nosedive: report

252 East 57th Street and 196 Orchard Street with Samantha Sheeber and Tal Alexander

Closing in the time of Covid-19: “We’re pulling out all the stops”

Gary Barnett, Central Park Tower, and the Tel Aviv Stock Exchange Bull (Credit: Wikipedia, iStock)

Extell’s Israeli bonds put on downgrade watch

Almost 50,000 retail stores have closed across the country, and the restaurant industry has lost $25 billion in sales since March 1, (Credit: Getty Images)

US will see $20B in retail loans come due starting this week