​​Renting a house through online platforms has become a new trend. More and more platforms are starting to offer “Zero Deposits” package to help the tenant to rent easier. However, consumers should be cautious and ask themselves: Are there any extra fees?

Wong Whei Meng, the CEO of SPEEDHOME, pointed out that according to the Bank Negara, more than half of Malaysians are unable to withdraw RM1,000 in emergency funds, and the rental deposit equals to a few months’ salary of young Malaysians. The lack of affordability eventually leads to them having to ask their loved ones or financial institutions for help.

A change of payment model

To reduce the financial burden of the B40 community, SPEEDHOME has adjusted their platform payment model. SPEEDHOME tenants are required to only pay one month’s rent and the tenancy agreement fee before moving in.

Established in 2015, SPEEDHOME is the first online property company in Malaysia to replace the deposit with insurance. The landlord can choose to purchase insurance from the company instead of the traditional 2.5 months’ rental deposit. If the tenant fails to pay the rent, or if there is property damage caused by the tenant, the insurance company will compensate the owner.

“After SPEEDHOME launched, more proptech platforms have started to offer deposit-free packages like us. However, they pay deposits on behalf of the tenants, classify them according to credit ratings and ask for extra interest,” explains the SPEEDHOME CEO. He therefore urges tenants to be cautious. For example, if you rent a house of RM1000, and there is a 3% interest rate, you would need to pay an extra RM30 besides the rental per month. It would accumulate to RM360 in a year.

For a deposit of RM2,500, the interest rate of RM360 is 14.4% per annum, and the interest rate is almost the same as that of a credit card.

Such companies’ models are similar to the Flatfair business model of a UK financial technology company. By assessing the credit rating risk of tenants, the first-time tenants pay the rental deposit and are then charged a certain amount of interest.

Renting platforms which pay the deposit for the tenant is actually similar to how banks work. They review the customers’ credit ratings before deciding on the interest charged to the tenant. In other words, if a customer has bad credit rating, he or she will have to pay for more expensive rent.

“Why I set up SPEEDHOME was to alleviate the financial burden of the M40 and B40 groups,  so that tenants with good credit ratings don’t have to pay deposit at all. Other platforms which offer Zero Deposit, but with interest, do help reduce the financial burden. But it’s temporary and not long-term as tenants have to pay higher prices in the future.”

“Although it’ll settle your cash flow problems in the short-term, your long-term financial performance will definitely be affected.”

Wong Whei Meng, CEO of SPEEDHOME

With the adjustment to the payment model, SPEEDHOME has also adjusted their insurance coverage accordingly. Instead of RM26,000, landlords can now get protection up to RM42,000. For more info, head on over to SPEEDHOME’s website.