Why is it not advisible to pay up front?
 

Suppose you were to rent a Paris apartment for 6 months from June -December. The landlord gives you the option of either making monthly payments or a lump sum (the rent for 6 months up front).

People have suggested that it is not wise to pay lump sum, but one should pay on a monthly basis? Why?

You are definitely going to stay there for 6 months.

Not exactly the same situation but... I know someone who didn't pay travel insurance for a cruise. Come hell or high water they were going on that cruise.

Their nephew was killed in a car accident the night before they were to leave. They didn't go on the cruise and because the cruise was one of a kind- the entire ship had been reserved by a group- the couple were not given the opportunity to go on another cruise through the cruise line.

Things happen.

You are definitely going to stay there for 6 months, unless something happens that derails your ability to do that. What's the cancellation policy? What happens if you commit to 6 months and for whatever reason you absolutely must leave after 3 months? (Do you have a visa that will allow you to stay in France for 6 months?) Do you get a discount if you pay in advance, otherwise why would you let the landlord earn interest on your money for multiple months?

On the other hand, will the value of your home currency against the euro will go down during the 6 months?

Yes. I will definitely stay in Paris for 6 months. Nothing will change that. Cancellation policy gives me the option to get all my money back should things not go right.

The only foreseeable problem of paying up front is giving the landlord interest money. Correct?

There is a difference between having the right to get your money back and not having to get your money back. Also, if your home currency is not the euro, the exchange rate may go up or down (it foreseeable that the rate will change, but not the direction is which it will change).

What if there is a problem with the apartment and your money is tied up for the six-month rental. Do you have enough money to rent another place and wait to get your money back?

I would pay by the month, just as you would do with any other rent unless there is a savings incentive to pay up front.

I can't imagine paying the lump sum? Why on earth? Unforseeable stuff happens, the exchange rate could swing against you, the apartment might have floods from leaky pipes - why would you ever think it was better to be locked in?

I see your point! Thank you.

I don't want to deal with the hassle of being bothered by the landlord on a monthly basis.

What's the hassle? You write a check or go to the ATM or whatever, drop off the payment or he/she picks it up or you mail it or whatever....where's the hassle? Don't you have things you need to take care of once a month back home? What's the diff?

I actually get the appeal of just getting it done with, not having to think about it each month, that it is not home, But I would want the control of not paying ahead in case there are issues, either initially or as time goes on. Getting the rent is the only real incentive a landlord has to keep things in good shape, fix things that break, etc.

I used XE (xe.com) to pay for my gite rental in France and it was very easy. They drew the money from my account electronically and sent the check to the owner. The exchange rate was good and once the account was set up (not hard in my case) it all went very well. There was no additional fee, aside from what is included in the exchange rate. You get to see the final price before you hit "buy". If I had to make a series of payments I would use them again for sure. (I live in the US and the check went to Europe.)

Forget about the exchange rate - it could swing for you or against you. If you are concerned about it, lock the exhange rate in now.

What's relevant is that if there are issues with the apartment which the landlord would be responsible to fix, but for some reason doesn't, you have means to apply pressure by reducing your monthly payment. You forego that option if you pay the whole amount upfront.

More remote, but a certain risk is insolvency of the landlord. Depending on French law, you may bear that risk if you make an upfront payment.

The bottom line is that unless you can negotiate a significant discount for making a lumpsum payment, I'd advise strongly against it and recommend monthly payments.

Another issue: IF you pay up front it is possible that the landlord won't be motivated to do anything else for you (i.e., repairs, etc.).

In most cases, it's never a smart idea to give someone money that could be incurring interest in your own account. The key to running a smart business is to keep your money as long as possible. Even if interest is not an issue, transferring ownership of monetary funds before funds are due could leave you at risk for loss in the event of an emergency or forced change of plans. It's much smarter and safer to retain ownership and release funds as they become due.