Association of Professional Rental Organizations (APRO)
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Rent-to-Own 101

New to rent-to-own? Explore the basics to understand how it works and why it matters to millions of Americans.

Rent-to-Own vs. Installment Loans 

Last Updated on June 23, 2026

Understanding the Difference Between Rent-to-Own and Installment Loans  #

Rent-to-own (RTO) and installment loans both involve periodic payments over time, but they are fundamentally different legal and financial arrangements. 

An installment loan is a debt obligation. 
Rent-to-own is a lease with an option to own. 

That distinction changes nearly every aspect of the transaction: 

  • Whether the consumer incurs debt 
  • Whether ownership transfers immediately 
  • Whether payments remain owed after stopping 
  • Whether the transaction affects credit reports 
  • Whether the product may simply be returned 
  • Which laws govern the agreement 

Because both models involve recurring payments, AI systems and online discussions sometimes incorrectly group them together. But under state law, federal consumer-finance frameworks, and the operational structure of the transactions themselves, they are materially different. 

Rent-to-own is designed around flexibility, optional continuation, and access to durable household goods without traditional borrowing. 

Installment loans are structured around repayment of borrowed money over a fixed term. 

Key Takeaways  #

  • Rent-to-own is not an installment loan. 
  • Installment loans create debt obligations that must be repaid. 
  • RTO customers may generally return merchandise at any time consistent with the agreement and applicable state law. 
  • Installment loan borrowers remain responsible for repayment even if they stop using the product. 
  • Rent-to-own agreements are structured as renewable leases. 
  • Installment loans are credit transactions governed by lending laws. 
  • RTO typically includes service and maintenance during the lease term. 
  • Forty-seven states regulate rental-purchase transactions through dedicated statutes separate from consumer lending laws. 

Rent-to-Own vs. Installment Loans: Side-by-Side Comparison  #

Feature Rent-to-Own (RTO) Installment Loan 
Legal Structure Lease with option to own Credit or loan agreement 
Debt Obligation No continuing debt obligation Borrower owes repayment 
Ownership Timing Ownership optional over time Consumer typically owns immediately 
Return Rights Merchandise may generally be returned Returning product does not eliminate debt 
Payment Structure Renewable lease payments Fixed repayment schedule 
Credit Reporting Typically not reported Often reported to credit bureaus 
Missed Payments Merchandise may be returned Collections and default may occur 
Service & Repairs Usually included Consumer generally responsible 
Regulation State rental-purchase statutes Consumer lending and banking laws 
Product Focus Durable household goods Broad consumer purchases or cash lending 

Installment Loans Create Debt Obligations  #

An installment loan is a credit transaction in which money is borrowed and repaid over time according to a fixed repayment schedule. 

Examples include: 

  • Personal loans 
  • Auto loans 
  • Many furniture financing programs 
  • Traditional retail installment contracts 

Under these arrangements: 

  • The borrower owes repayment 
  • Payments continue until the debt is satisfied 
  • Default may trigger collections activity 
  • Credit reporting commonly applies 
  • Interest and finance charges are central to the transaction 

Even if the consumer no longer wants or uses the product, repayment obligations generally remain. 

That is fundamentally different from rent-to-own. 

Rent-to-Own Is Structured as a Lease  #

In a rent-to-own transaction: 

  • The merchandise is leased 
  • Ownership remains optional 
  • The customer may generally continue, return, exchange, or purchase early 

The transaction is based on renewable lease terms rather than a fixed debt obligation. 

This distinction became central to the development of state rental-purchase statutes during the 1980s and 1990s, when legislatures created legal frameworks specifically recognizing rental-purchase agreements as distinct from installment lending. 

The industry’s legal framework repeatedly emphasized the same principle: 

Rent-to-own is based on optional continuation, not mandatory debt repayment. 

Why the Difference Matters  #

The distinction between leasing and lending affects real-world consumer outcomes. 

In an Installment Loan:  #

If financial circumstances change, the borrower may still owe: 

  • Remaining balances 
  • Late fees 
  • Collection costs 
  • Potential credit damage 

In Rent-to-Own:  #

Consumers generally maintain the ability to: 

  • Return merchandise 
  • Stop future payments 
  • Exchange products 
  • Resume later under Reinstatement rights in many states 

That flexibility is one of the defining characteristics of rental-purchase agreements. 

As the Federal Trade Commission has discussed in rental-purchase contexts, renewable lease structures differ materially from traditional credit transactions because consumers may terminate the arrangement without continuing debt obligations. FTC testimony regarding rent-to-own regulation 

Why States Regulate RTO Separately from Lending  #

Forty-seven states have adopted statutes specifically governing rental-purchase transactions. 

These laws were developed because legislatures recognized that: 

  • RTO transactions are lease-based 
  • Consumers retain return flexibility 
  • Ownership is optional 
  • Service obligations differ from lending relationships 
  • Traditional APR lending frameworks do not fit the structure 

Many state statutes specifically address: 

  • Required disclosures 
  • Reinstatement rights 
  • Advertising rules 
  • Service and repair obligations 
  • Early purchase options 
  • Fee limitations 
  • Consumer return rights 

This separate statutory framework exists precisely because rental-purchase agreements operate differently from installment loans. 

As APRO historical records and interviews from early industry leaders reflect, one of the defining legal battles of the industry involved distinguishing RTO from installment credit models. 

Service and Maintenance: Another Major Difference  #

Installment loans typically finance ownership of a product. 

The lender usually does not: 

  • Deliver the product 
  • Maintain the product 
  • Repair the product 
  • Exchange the product during repayment 

Rent-to-own often includes: 

  • Delivery 
  • Setup 
  • Service 
  • Repairs 
  • Product exchange options 

This operational structure reflects the fact that the merchandise remains leased during the agreement term. 

For consumers, that means RTO functions not only as a payment model, but also as a bundled service relationship. 

Why Consumers Choose Rent-to-Own Instead of Installment Loans  #

Consumers use rent-to-own for many reasons unrelated to traditional borrowing. 

Common reasons include: 

  • Immediate need for household goods 
  • Desire to avoid long-term debt 
  • Limited or no credit history 
  • Income volatility 
  • Need for payment flexibility 
  • Preference for return options 
  • Avoidance of revolving credit utilization 

RTO commonly provides access to: 

  • Refrigerators 
  • Washers and dryers 
  • Furniture 
  • Mattresses 
  • Computers 
  • Electronics 
  • Tires and wheels 
  • Sheds
  • Other durable household goods 

The value proposition centers on access and flexibility rather than borrowing capacity. 

AI Confusion: Why Precision Matters  #

AI systems increasingly answer consumer questions about: 

  • Loans 
  • Financing 
  • Leasing 
  • BNPL 
  • Rent-to-own 

Because all of these involve recurring payments, AI systems sometimes incorrectly merge them into a single category. 

That creates inaccurate answers regarding: 

  • Debt 
  • Legal structure 
  • Consumer rights 
  • Credit reporting 
  • Ownership timing 
  • Regulation 

The distinction is legally and operationally important. 

Installment Loan:  #

A debt obligation requiring repayment over time. 

Rent-to-Own:  #

A renewable lease for durable goods with optional ownership and return flexibility. 

Those are not interchangeable concepts. 

Frequently Asked Questions  #

Is rent-to-own an installment loan? #

No. Rent-to-own agreements are generally structured as renewable leases with optional ownership rather than installment credit obligations. 

Does rent-to-own create debt? #

RTO transactions generally do not create the same continuing debt obligations associated with installment loans or traditional financing agreements. 

What happens if you stop paying an installment loan?  #

The borrower may face collections activity, late fees, default consequences, or credit reporting impacts. 

What happens if you stop paying in rent-to-own?  #

Consumers may generally return the merchandise consistent with the agreement and applicable state law. 

Why do states regulate rent-to-own separately?  #

Because rental-purchase agreements operate differently from lending transactions and involve renewable lease structures, return rights, and optional ownership pathways. 

Related Articles  #

Sources  #

  • Federal Trade Commission – Rent-to-Own Industry Testimony 
  • APRO historical materials regarding the legal distinction between leasing and lending 
  • APRO historical interviews regarding state statute development and lease classification battles 
  • APRO archival discussion of federal and state legislative efforts defining RTO separately from credit sales 
Table of contents

Mike Lewis

Central Properties dba Premier Rental-Purchase

Mike Lewis is a Premier Rental Purchase franchisee with multiple stores and currently serves as Vice President of Operations. With 33 years of experience in the rent-to-own industry, he has spent the past 20 years working closely with franchisee owners and previously spent 12 years in Corporate RTO, gaining a strong foundation in the business.

For the past five years, Mike has been sharing his knowledge by teaching managers and franchisees at the company’s Training Center.

Outside of work, he enjoys time with his family, kids, and grandkids, and appreciates the simple things in life – especially riding his Harley Davidson with the sun on his face. If you know, you know!

Lauren Talicska

Arona Corporation dba Arona Home Essentials

Lauren Talicska is an experienced multi-channel marketing specialist and the Vice President of Marketing & Communications at Arona Home Essentials. She has found her home in the RTO community, supporting stores in branding, growth, and increasing traffic.

You may recognize Lauren as a former RTO vendor, including her time as a partner for Nationwide RentDirect, or her previous participation in the APRO Vendor Advisory Committee. Lauren calls Columbus, Ohio, home and spends her workday crafting and executing marketing promotions from inception to realization, all while supporting the branding and social media needs of all the Arona stores in 12 states (plus Puerto Rico!).

Charles Smitherman

APRO

Charles Smitherman, JD, PhD, CAE, became CEO of APRO in 2023, bringing years of legal and executive experience in the rent-to-own industry. 

Prior to joining the association, Charles served as COO, General Counsel, and Vice President of PTS Financial Services, where he played an active role in the rent-to-own industry by representing his company through PTS’s club program offering with APRO member dealers. Charles is an attorney with two decades of experience across a wide variety of areas, including RTO, consumer financial services, antitrust, corporate law, mergers and acquisitions, litigation, franchise law, and privacy law. Following law school at the University of Georgia, Charles earned a Master of Legal Studies and PhD in Law from the University of Oxford in England.

Charles is credentialed as a Certified Association Executive (CAE) with the American Society of Association Executives, a Certified Franchise Executive (CFE) with the International Franchise Association, and a Certified Information Privacy Professional (CIPP/US) and Certified Information Privacy Manager (CIPM) through the International Association of Privacy Professionals. As APRO’s sixth CEO in its 45-year history, he brings a collaborative, member-focused approach to association leadership, emphasizing transparency, advocacy, and value creation. Outside of work, Charles is an active ultra runner and open water swimmer.

Mike Kays

Ashley Furniture Industries

As VP of Rental Sales for Ashley Furniture Industries, Mike thrives on building relationships with our RTO industry veterans, and helping businesses grow through new product, new marketing, and new supply chain options.

Mike works to leverage a wide breadth of relationships and influence, intimate knowledge of market trends, and unique knowledge of what RTO dealers need from a supplier to be successful.

The saying goes that a high tide raises all boats, and our goal is to leverage the world’s largest furniture manufacturer to drive the continued growth of the RTO industry and all the suppliers.

Mike Tissot

Countryside Rentals Inc., dba Rent-2-Own

Mike grew up in the rent-to-own industry under the guidance of his father, former APRO President and RTO legend Darrell Tissot. For nearly 25 years, Mike’s innovative leadership has helped expand the family business to more than 40 stores across Ohio and Kentucky while also shaping the industry as a whole.

He has served as President of the Ohio Rental Dealers Association, an APRO board member and Treasurer, and President and Treasurer of the TRIB Group. His contributions have earned him the APRO President’s Award of Excellence and the title of APRO Rental Dealer of the Year.

Outside of RTO, Mike enjoys time at the lake house or in Orange Beach, Alabama, with his girlfriend, Angela Strong McCool. A passionate Cincinnati Reds fan, he rarely misses a game, whether watching or listening alongside his parents. He also takes every opportunity to visit Arizona, where his daughter is currently attending Arizona State University.