Security deposit how does it work

Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. A security deposit is money that is given to a landlord, lender, or seller of a home or apartment as proof of intent to move-in and care for the domicile.

Security deposits can be either be refundable or nonrefundable, depending on the terms of the transaction. A security deposit is intended as a measure of security for the recipient, and can also be used to pay for damages or lost property.

Security deposits serve as an intangible measure of security, or as a means of tangible security in the event of damages or lost property. States have varying laws on where a security deposit is held, such as separate banking or escrow account and whether it must collect interest. Security deposits are paid before moving in or taking possession of the property and these deposits are typically the same amount as the monthly rent. Typically, the letter will detail a history of your stay at the rental property and make an argument of why you deserve to get your money back.

While it often doesn't come to this, you may need to file a lawsuit in small claims court to get your money back.

Often, this isn't worth the process unless your security deposit is a substantial amount of money. Learn how to create tax-efficient income, avoid mistakes, reduce risk and more. With our courses, you will have the tools and knowledge needed to achieve your financial goals.

Learn more about TheStreet Courses on investing and personal finance here. Receive full access to our market insights, commentary, newsletters, breaking news alerts, and more. I agree to TheMaven's Terms and Policy. What Is a Security Deposit? How Does a Security Deposit Work? The lower your credit score, the riskier you are considered to be, thus, the pricier your security deposit could potentially be.

Some landlords or property management companies even have a standard score that they hold potential residents against to determine whether or not they can move in. So before you apply for an apartment, be sure to check out your credit score to see where you stand.

The more money they charge, the more problematic your track record may seem. In other words, more problems, more money! Additionally, when calculating expenses, be sure you know how to spot the difference between extra fees and a security deposit.

These fees can be anything from application processing to additional pet fees. Stay organized, write separate checks, and read. Your landlord or property management company will most likely give you a checklist of payments before you move in and this will be one of them. Make sure you are punctual about getting your deposit in on time as it can affect whether or not you are able to secure the apartment.

As far as where your security deposit goes, property management companies are required to put your deposit in an interest-bearing account. This is usually done within a month of your move-in. Regardless of where your security deposit is held, it cannot be spent unless appropriate circumstances arise, such as beyond your typical wear and tear. Just like the amount of a security deposit, the timeline in which it will be returned to you also varies and is dependent on where the property is located.

It can range anywhere from 14 to 60 days post move-out. If you feel as though you are getting cheated out of good money and seriously have a good case on your hands, you might want to consider writing a demand letter. A demand letter is essentially a formal argument on why your security deposit should be returned. Insure the return of your security deposit by taking photos when you move in and move out. Do your final walk-through with the landlord, if possible, and note his comments.

You may have time to repair anything he finds that may jeopardize the return of your deposit. It might seem redundant if your landlord is breaking up your deposits into a rent deposit and a security deposit. Some landlords opt to charge a rent deposit that is specifically a guarantee against you paying your last month's rent. However, the deposit isn't necessarily payment for your last month in the place. It can merely act as a guarantee of final funds should your landlord ever need to evict you.