Are you a renter in the United States? If so, you know that you usually have to pay a security deposit before moving into your new place. This can be a huge hassle, especially if you're short on cash.
Luckily, there are several security deposit alternatives available that can help make the process easier for you.
In this post, we will discuss the different types of security deposit alternatives and how they can benefit renters.
The growth of security deposit alternatives has been exponential over the last few years due to their ability not only to protect property managers and renters but also to help those who cannot afford high up-front costs associated with moving into new homes while making sure they maintain residency at an affordable rate through renting out space from others rather than buying one outright.
As a renter, you may be wondering what your options are for security deposits. Many property owners require security deposits in order to protect their property, but there are some alternatives that might work better for both you and your landlord.
What Is a Security Deposit Alternative?
Renting an apartment or a house can be a great option, especially if you're not quite ready to commit to buying a home. However, one thing that can sour the experience is having to hand over a security deposit. In some cases, this amount can be quite large - often equivalent to one or two months' rent.
A security deposit alternative is the amount of money that an individual pays when they first rent a property but it will be paid in installments instead of paying a lump sum for the security deposit. This option is available to tenants who meet certain eligibility requirements, such as having a good credit score and being employed.
Different Types of Security Deposit Alternatives
Security deposit alternatives can be a great way to replace traditional security deposits. Surety bonds, lease insurance, and pay-per-damage all have their pros and cons depending on what your property needs from them but in general, tenants will prefer this form over others due simply because it requires less commitment from you as an owner.
One of the most popular security deposit alternatives is a surety bond. A surety bond is insurance that protects your landlord in case you damage the property or don't pay rent. The premium for a surety bond is typically much lower than the amount of a security deposit, making it a more affordable option for many renters. Most companies charge only 20% of their usual deposit fund rate, this option offers full peace of mind.
A surety bond is a contract between three parties: the obligee, the principal, and the surety. The obligee is the party who is requesting the bond (usually a government agency or a private company). The principal is the party who will be performing the work or fulfilling the obligation stated in the bond. The surety is the party that agrees to be responsible for any losses incurred by the obligee if the principal fails to meet their obligations.
A surety bond functions as insurance for the obligee. If something goes wrong and the principal fails to meet their obligations, then the surety will have to pay out any damages that are awarded to the obligee.
For property owners, a Rent Guarantee is a service that can help protect you from losing money if your tenant suddenly stops paying rent. Here's how it works:
If you have a tenant who stops paying rent, a third-party guarantor will step in and cover the missed payments for a set period of time. This gives you time to find a new tenant without having to worry about making ends meet yourself.
Rent guarantees are becoming increasingly popular as more and more people are becoming landlords. They offer peace of mind and can help take some of the financial risks out of renting your property.
As for renters, Rent Guarantees are like Surety Bonds, but with one major difference. Instead of getting it from a company or an organization, you will have a co-signatory to act as a guarantor for you in cases you, as a renter, cause damage to property or fail to pay your rent. This third-party signatory will cover the repair costs.
This option can be more costly than traditional security deposits because qualification processes are harder for these types of mortgages and only certain people qualify.
Lease insurance is a type of coverage that many property owners accept. The premium payment is done in monthly terms which cover property damages from natural disasters or accidents. They’re similar to usual insurance options however, unlike surety bonds, they don't refund any fees so it's important to know what your specific situation entails before getting this kind of plan.
Pay Per Damage
Pay per damage is a type of insurance that allows house renters to only pay for the damages they caused instead of paying a security deposit upfront which is managed by your property manager.
The difference between PPD from other insurance deposit alternatives is that you will manage the funds yourself, and will only be billed accordingly. This can be beneficial for those who are renting because it saves them money in the long run.
For instance, if you accidentally spill a drink on your carpet, you would only have to pay for the cleaning bill and not the entire replacement cost of the carpet. However, the majority of property owners do not accept this method due to the high risk of them not getting what they are owed.
Why Deposit Plus+ By Rentsense Is The Best Security Deposit Alternative?
It’s a unique alternative to traditional security deposit insurance and combines the best things that other alternatives offer.
The main reason why you should get RentSense’s Deposit Plus+ is it’s a one-time payment unlike other alternatives to security deposits. Good for the life of the lease for the same unit. No yearly fees!
The tenant will only need to pay 25% of the agreed-upon month’s rent and this payment will cover the duration of their tenancy in that unit.
There is no cost to the property owner or manager and everything is paid for by the tenant. This renter's insurance product provides more coverage for renter defaults and damages.
Deposit Plus+ can also cover resident negligent damage, utility default, eviction filing fees, and pet damage.
For existing tenants, we also have Return To Renter in which property owners can return their earlier cash deposits and convert them to Deposit Plus+.
We hope the information here will help you make an informed decision about which option is best for you. Contact us today to learn more about our renter’s insurance products.