Rent and Credit > Holding Deposit vs Security Deposit: Key Differences Explained

Holding Deposit vs Security Deposit: Key Differences Explained

Wollit Team2 minute read · Updated 1st August 2025

Looking for a rental property? You'll probably come across two types of deposits that can impact your wallet: holding deposits and security deposits. Knowing the difference between them helps you make better choices and protect your money.

What's a Holding Deposit?

A holding deposit is money you pay to reserve a rental property while your application gets processed. Think of it like booking a table at a popular restaurant – you're holding your spot.

Most holding deposits cost about one week's rent. This is the legal maximum in England and Wales. You pay this to show you're serious about renting the property. It also stops the landlord or agent from accepting other people's applications while they check yours.

What's a Security Deposit?

A security deposit is different. It's money you pay before moving in to protect the landlord if something goes wrong. This might be damage to the property or if you don't pay rent.

Security deposits are usually bigger than holding deposits. They're legally capped at five weeks' rent if the annual rent is under £50,000, or six weeks' rent if the annual rent is £50,000 or more. The exact amount depends on the property.

The Main Differences

What They're For

Here's the biggest difference: holding deposits reserve a property during your application. Security deposits protect landlords after you move in.

You pay a holding deposit early on. You pay the security deposit just before getting your keys.

Your Legal Rights

Security deposits have strong legal protection. Landlords must put your security deposit in a special government-approved deposit protection scheme within 30 days of receiving it. They also need to send you information about which scheme they've used. This doesn't happen with holding deposits.

Managing Your Money

These upfront costs can really affect your budget. Before agreeing to rent anywhere, make sure you understand:

What each deposit covers
How to get your money back
Your rights if there's a problem
How these payments fit your budget

These upfront costs can really affect your budget, especially when you're building your credit history. Rental payments don't usually show up on your credit report automatically – but they can if you use a rent reporting service like Wollit's. Having good credit helps you get better rental deals and shows landlords you're reliable.

The Bottom Line

Holding deposits reserve properties during applications. Security deposits protect landlords after you move in. Both serve different purposes, have different rules, and different ways of getting your money back.

By understanding these differences, you'll make better financial decisions throughout your rental journey. You'll protect your money whilst securing the home you want. Remember, knowledge is power when it comes to your finances – and that includes understanding many aspects of renting.