The tech industry’s ability to disrupt existing markets is well documented, with major players like Uber and Airbnb making their presence felt overseas and closer to home. When it comes to the rental market, rental auction apps like Silicon Valley-based Rentberry and Live Offer were also celebrated for an Australian launch.
Today, another start-up has established itself in the United States, offering tenants using its platform the option of borrowing money in the form of a one-time loan to help them cover the rent.
Headquartered in Santa Monica, Domuso has been providing service for two years in Southern California and recently expanded upstate.
The company operates an online rental payment platform, working with businesses that run large residential complexes, whose income comes from payment processing fees.
Tenants of these properties pay through Domuso and have the option of applying for a Domuso installment loan to cover rent they cannot manage rather than incurring late fees and potentially risking eviction. There is also financing to cover security deposits or rental guarantees.
The loans are available for six to 12 months and are said to have an average annual interest rate of 27 percent, which has raised some concern from financial experts. However, Domuso co-founder Michael Lightfoot argued that some residents were already paying their rent on credit and that Domuso was a safer digital alternative.
He said the company had “no intention of going down a payday lending route, or anything in that regard.”
“We grant one loan at a time for any single payment due [one month’s rent, move-in and deposit, move-out, etc]. Tenants have to repay their current loan before taking out a new loan, ”CEO Damian Langere explained in an interview with LA Biz.
He said the service would be beneficial for workers in the gig economy facing strict rent payment deadlines, or for tenants struggling with unexpected financial emergencies, such as medical bills or losing their jobs. .
The company had, by early 2018, raised a total of $ 5.8 million in investment and had around 30,000 properties in its system, with plans to expand by attracting new property management companies. Two years ago, about 4,000 of the 20,000 tenants then using Domuso had made a payment using the credit option.
Figures released in 2017 by CareerBuilder, a job search site, suggest that up to 80 percent of Americans are living paycheck to paycheck – and California is ranked as the second least affordable state to live in. housing built around the Bay Area and Los Angeles is affordable only for workers earning more than US $ 100,000 ($ 138,700) per year.
San Francisco and Los Angeles were ranked in the top 10 least affordable housing markets in the world by Demographia in 2018, as well as in the top 5 of the least affordable cities for renters.
Although the platform is not available in Australia, other forms of credit such as short term loans can be used by tenants who are struggling to make ends meet.
Comparison platform Finder.com.au editor-in-chief Kate Browne said using credit to pay rent was a dangerous situation.
“Payday lenders have been on the rise in Australia for a long time, ”she said, noting the precariousness of the labor market and the plight of low-income people. Rental stress remains high in Sydney and Melbourne, despite the recent drop in rents in Sydney.
“Another reason we’re seeing this is the increase in online access – you don’t even have to get up from the couch and you can get a loan in as little as 30 minutes,” he said. she adds.
“In terms of the alternative, the very first is to try to negotiate with your landlord or agent. There are also financial advisers who offer free independent advice, this is a very smart stopover.
For those who still need to borrow money, it was worth comparing the options, she said, with low-interest loans available to low-income people.
“We’re always reluctant to suggest people go into debt,” Ms. Browne said.