Today’s guest blog features Homes with Style, an ethical weekly payment store founded by Knowsley charity “The Big Help Project” to challenge the traditional rent-to-own sector. The Financial Health Exchange has covered rent-to-own before – customers who can’t afford the upfront costs can end up paying a huge poverty premium for white goods and furniture. That’s why it’s vital that there are organisations building an lending model that can provide an ethical and affordable alternative for the excluded.
Rent-to-own through high street stores offering weekly payments is the poverty premium in action. With fewer credit options many lower income households turn to the sector for white goods and furniture, often compounding the problem. The higher overall cost is fuelled by inflated purchase prices, steep APRs and obligatory insurance; this takes a sizeable chunk of disposable income and can prevent families from getting the most from their money. In Knowsley, local charity ‘The Big Help Project’ saw an opportunity to offer an alternative ‘weekly payment store’ with a huge difference: their model is underpinned by affordable credit. Working in partnership with two local credit unions – Enterprise and Riverside – along with Co-operative Electrical and Knowsley Council, ‘Homes with Style’ was set up to challenge the rent-to-own sector.
The premise is simple – people shouldn’t be forced to pay a premium for using credit to buy white goods and furniture, and those who have fewer credit options available to them should be able to have the same shopping experience as anyone else. The flagship Homes with Style shop opened just before Christmas 2016 in Huyton town centre. It’s bright, welcoming and offers brands customers who’ve used rent-to-own stores before will recognise. However, there are two big advantages to shopping at Homes with Style – the lower cost and the fact that customers own their purchases from day one.
For example, customers can save around £300 on the cost of a comparable Hotpoint fridge by choosing Homes with Style over other weekly payment stores:
|Typical weekly payment store||Homes with Style|
|Payment period||156 weeks (3 years)||52 weeks (1 year)|
|Total amount repayable||£468.00||£162.47**|
*prices correct as at 24 November 2016
**interest charged at 2% per month on a reducing balance. Terms and conditions apply.
Shoppers can browse Co-operative Electrical’s website using the in-store portal and choose from a selection of quality electrical and white goods. Staff guide shoppers through the process to help them decide which items might be best for them and their budget. To complete the offer, Homes with Style offers a range of furniture plus heavily discounted household paints through the ‘Community RePaint’ scheme.
Customers can buy outright with cash or their own credit, or can apply for a low cost loan through one of the local credit unions. A member of staff from one of the partner credit unions is based in-store, making the application process swift. Once credit is approved, the item is ordered and delivered straight to the customer’s home. Loan repayments are made direct to the credit union, turning more shoppers on to the advantages of saving and borrowing this way. They’re encouraged to build savings which could be used towards future purchases or to help provide financial security.
Helen, a single mother with three children visited Homes with Style in January. After chatting with Manager Christine, Helen explained she had previously used other weekly payment stores and currently had furniture from one locally based rent-to-own store. Unable to get credit from anywhere else when she needed a sofa suite, Helen returned to the same rent-to-own store.
Already a member of Enterprise Credit Union, Helen was approved for a further loan alongside her existing commitments, allowing her to purchase a new suite through Homes with Style and for the costly items to be returned to the rent-to-own store.
Helen’s move to Homes with Style has had a significant impact on her family’s finances. Previously she was paying £20 a week over 3 years for her suite. Over the length of the agreement, Helen would have paid over £3,100 (not including any default notices for missed payments) and would not have owned the goods until the final payment had been paid.
Under her new agreement with Homes with Style, Helen will pay half this amount for less than half of this period – £10 per week for 68 weeks, a total of £680 (including interest) and she owns the suite from day one meaning that it cannot be repossessed.
Helen’s change to Homes with Style saved her an impressive £2,420. She said “I am really made up with my couch. I love this shop and I think this is a fantastic idea. I have saved so much money. I tell all my friends and family to go there”
For more information contact Barry Cooper, Chief Executive of ‘The Big Help Project’ on 0151 546 0470 or firstname.lastname@example.org