Deposits, letting agent fees, and rent are increasing in price. Here is a guide on how to pay your deposit and whether you should consider using a credit card or borrowing the money.
Your mode of payment
Your method of payment is up to your letting agent or your landlord, but they may let you pay by:
- Credit Card
- Debit Card
- Bank Transfer
Private landlords sometimes accept cash. If you pay with cash, secure a receipt in case you need proof of the amount of your payment in the future.
If you already have the money saved up, using this is normally your cheapest option. If you can not yet afford a deposit, you need to borrow the money or save up.
How to quickly save up a deposit
You can save for a deposit by setting aside as much as you can afford every month into a savings account. Increase the amount that you can save by:
- Decreasing your cost of living
- Sticking to a budget
Could you borrow the money for the rent instead?
You could borrow money if you do not have enough saved for a deposit. You can pay it back after several months.
However, the interest you pay can make it much more costly than using the money that you have saved. Paying back a loan can also make it more difficult for you to afford your rent.
Some landlords normally prefer tenants who have saved up enough cash for a deposit. This is because it determines that you are financially reliable.
Some might not allow you to rent their property if you are in debt because you could find it hard to afford your rent as well as the repayments for your loan.
Can you pay a deposit using a credit card?
Yes, some leasing agents allow you to pay your deposit using a credit card. However, they often charge you a fee of 2% of the deposit amount or more.
Private landlords usually do not accept credit card payments. Also, some letting agents do not accept them either.
This is because landlords can not usually accept credit card payments, and they cost more for letting agents process the payments.
If you decide to pay by using your credit card, you could pick one that offers interest-free purchases. This could allow you to pay back the deposit amount over several months without interest charges.
Can you avail a loan for your rental deposit?
There are a lot of ways to borrow money, including:
- An interest-free money transfer credit card
- An interest-free overdraft
- A personal loan
Be sure that you can be able to pay the repayments on top of your rent and the rest of your living expenses before you apply for any kind of loan.
Can you borrow from family or friends?
If your family, parents, or friends can loan you the money for your deposit, this could be a much cheaper option, especially if they do not charge interest.
Ensure that you get your deposit back
When you move out, you should get your deposit back if you:
- Make on-time payments for your rent
- Not damage anything while you live in the place
- Make the property tidy and clean when you move out
- Follow the terms of your tenancy agreement
Check if your money will be safe
Estate agents and landlords cannot keep your deposit in their own bank account. They are required to pay it into a Tenancy Deposit Plan (TDP).
This hinders them from spending the money. It also gives you the extra protection that could assist you to get your money back when you move out.