Are third-party bond loans about to shake up the Australian rental market?
The way Australians renters pay their bonds might be about to change, with the emergence of a number of insurtech companies that are offering to cover rental bonds for them - in exchange for a fee that is.
Traditionally bonds, which in most cases will be in the thousands of dollars, are paid by renters at the start of a lease period and are held by a state government entity (such as the NSW Rental Bond Board or Victoria’s RTBA) until they move out.
Insurtech startups such as Snug and Traity are aiming to disrupt the current system by giving reliable renters the opportunity to pay an upfront fee in exchange for access to the bond deposit which would otherwise be locked away - potentially freeing up spare funds for anything from investing to paying off credit card debt.
For example, instead of paying $2,400 for your bond, with Traity you would only need to pay a $336 upfront fee called a ‘Trustbond’. Traity then provides your landlord with a bond payment guarantee, and you would only need to pay for any of the standard tenancy breaches such as damage to the property or unpaid rent when they occur.
Traity, which originated in Spain, is reportedly partnering with insurance giant Suncorp in the near future to offer its ‘Trustbond’ product to landlords via the Terri Scheer insurance brand.
In an interview with the AFR, Suncorp’s Executive General Manager of Personal Insurance Louise Dwyer stated that changes to the bond system could be beneficial to the increasing number of Australians who are renting.
"Being able to help them to release capital and use it in a different way is a huge advantage for our customer base," she said.
"It [Trustbond] helps to make the rental market that much more affordable and we can use the data to make different decisions about lending criteria in the future."
Both insurtech startups are relying on the reputation of renters to ensure payment in the event of a bond claim, with Snug refusing to accept applications from anyone who has had an unpaid bond claim on their record in the past three years.
Traity is using an even more unique system to ensure the reliability of their rental applicants - using a system called ‘Trustscore’ (which is surprisingly black mirror-eque!), Traity provide a score based on the reputation of an individual across a number of platforms including social media sites such as Facebook and Twitter as well as reviews on AirBnB and Ebay.
Snug launched its bond offer to renters across the country on September 1, while Traity’s Trustbond is only currently available to renters in South Australia.
In the meantime, if you’re looking for ways to save up for that bond check out these five great money-saving ideas to get started.