Rental deposits are the costliest hurdle to clear for anyone involved in the race to find a rental home in the UK.

Just how expensive will be obvious to anyone who’s rented a property recently. Because although the government is set to cap deposits at four weeks’ rent, most landlords still ask for six-weeks’ worth.

Tenant on average must find £1,300 to move into a property in addition to the month’s rent they pay in advance of £940. In total they therefore need to find £2,240 to move into a typical property.

This is a small fortune for many people and particularly for young renters. So, what are their options?

Cash deposits

If a tenant pays their deposit in cash or via bank transfer to a letting agent or landlord, then it must be lodged with one of the three government-approved rental deposit protection schemes within 30 days.

Read our guide to deposit protection schemes.

The beauty of this system is that, if the tenant later has a dispute over deductions or fees charged when they move out, their deposit protection scheme will act as an independent referee between them and their landlord/agent.

Insurance-backed version

Insurance-backed deposit protection schemes work in the same way as cash deposits but instead of lodging the money with a protection scheme, the agent/landlord puts it in their own bank account but takes out ‘cover’. This means that, if they go bankrupt or there is a dispute, the deposit will be returned to the tenant or the dispute arbitrated independently.

Alternative scene

Several insurance-backed services have sprung up that replace cash deposits entirely. These are provided by different companies including letting agents, insurance companies and tech start-ups and guarantee to reimburse the landlord if a tenant damages the property or doesn’t pay their rent.

These ‘no deposit’ schemes are backed by the big insurers who take on the risk. Some also operate through a tenant ‘membership’ scheme but really, it’s the same thing.

This ‘no deposit’ alternative is slowly gaining fans among tenants particularly those who don’t have any money saved up to pay a deposit or who are waiting for a former landlord to return their previous deposit.

Costs vary a lot for tenant-funded schemes from a set fee of £129 to one week’s rent, which in London and other cities can run to hundreds of pounds.

What these schemes pay for also varies. Some cover just damage to a property while others include unpaid rent or bills as well. But others only offer a rental ‘guarantee’. If a tenant trashes a landlord’s property then they may still be liable to pay the cost of repairing it when they move out.

And most of these schemes come with catches. For example, some ask the tenant to pay for the ‘cover’ but if they later move home, it ends without a refund being paid.

Some schemes offer 'good behavour' bonuses just like car insurance. For example, if a tenant pays their rent on time then the lower the cost of their cover next time they rent a property.

Rent Reporting

If a tenant uses one of these services, then our rent reporting platform can play a role. By signing up to CreditLadder and letting us record your rental payment each month, this track record can be used to help reduce the premiums you pay a 'no deposit' service. They will see you as less of risk, in other words.

Deposit free renting

There are several developers in the UK who are building dozens of flat developments which are designed to be rented out and are centrally managed by one company. Called ‘build to rent’ or ‘multi-family housing’ these developments are establishing a new model of renting copied from the US.

The idea is to make renting affordable and many offer deposit and fee-free moving in and only charge a month’s rent in advance rather than six weeks. But beware – sometimes there is no such thing as a free lunch and some of these developments charge higher rents than comparable properties in the surrounding area to fund all this ‘free’ stuff.

On the other hand, the tenants who move into these kinds of blocks don't have to pay a deposit which, when you're brasic, can be a huge headache to rustle up.

Remember, CreditLadder can help you improve your credit score.

CreditLadder can improve your credit position by reporting your rent payments. CreditLadder is the first way to improve your credit score and position across all three of the main Credit Reference Agencies in the UK, namely Experian, Equifax and TransUnion. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money. CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.

Remember the content provided in this article is for information purposes only and should not be considered as advice.