Deposit Free Renting: Great Deal or Secret Debt Trap?


With a typical deposit for renting a home coming to at least a month’s worth of rent – sometimes significantly more – it’s no surprise that renters are looking for ways to bring the cost down. Deposit free renting schemes seem to offer exactly that, giving would-be tenants an opportunity to rent without coughing up any up-front cash. Unfortunately, they can end up costing a lot more over the full length of a tenancy. This doesn’t mean that they’re never a good idea, but you will definitely need to proceed with caution.

Zero-deposit rental schemes are typical offered from particular agencies. There are a few different types of arrangement: some involve paying a one-off, non-refundable fee at the start of your tenancy (this would be much smaller than a typical deposit), while others require you to pay a smaller, regular fee on a subscription-type monthly basis.

With subscription type deals in particular, you could find yourself paying a lot more in fees than you would have ended up spending on a deposit. This money is non-refundable, too – you won’t get it back at the end of your tenancy. This means that it’s unlikely to be a good deal for anybody who can afford to pay the deposit instead. However, if coming up with that much cash simply isn’t going to be possible for you, a monthly fee could help you to spread the cost.

What if there’s damage to the property?

This is one of the big concerns around deposit-free renting. A traditional deposit is there to cover the costs of any damage that may occur to the property while you’re living there. And, while none of us set out intending to damage our homes, there are lots of reasons that you may find yourself causing damage that goes beyond general wear and tear.

The fees paid under a deposit-free renting scheme would not cover any of this potential damage, and your landlord would still have a right to claim the money back from you. This means that you could potentially find yourself with an unexpected bill and no way to pay it.

What are my options?

The government has stated that landlords and agents can’t force tenants to take out an alternative to a traditional deposit – it’s their as an option, but you have the right to refuse and pay a deposit instead.

You should also consider looking into whether you can get an interest-free loan to cover the cost of your deposit. Some councils offer interest-free loans and even some employers will offer this too. In some cases you can also pay a deposit with a credit card or using a traditional bank loan. Only do this if you are sure that you can afford the monthly repayments and understand how much the additional interest will cost. And be warned, some agencies will charge a fee for paying via credit card.

If you do decide to go ahead with a zero-deposit scheme, then spend some time reading through the terms and conditions. For those without the means to save up a cash lump sum they can certainly be a route into renting, but it’s important to be 100% sure that you understand the long-term costs and financial implications.


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