Hire purchase is quickly becoming popular in modern times. Businesses and individuals looking to acquire assets are choosing hire purchase terms. This has seen hire purchase acquire special importance in the Kenyan economy. In the past, hire purchase has been seen as a way for businesses to acquire high-value assets such as vehicles and machinery. However, in modern times, even small but essential items such as telephones, household appliances, Televisions, and other electronics are available on hire purchase terms.

What is a hire purchase agreement?

A hire purchase agreement is a contract that requires one to pay rent for a certain period after acquiring assets. These rent payments are defined as installments in a hire purchase agreement. In addition to a hire purchase agreement, one has to make a downpayment to the seller to acquire the assets. The customer acquiring the items is known as the hirer. While a hire purchase agreement acts as a contract of bailment, it also has an element of sale. When the hirer pays all the installments to the owner, the dealer transfers the title of the assets to them.

Legal aspects of a hire purchase agreement

1.      Possession

Immediately the hirer pays the down payment to the owner of the goods, they can acquire them and utilize them.

2.      Ownership

While the hirer acquires the goods immediately after paying the installment, they do not automatically acquire ownership. Ownership of the assets remains with the vendor or dealer. One only becomes the owner after they complete payments by paying all the installments.

3.      Installments

Installments are among the core features of a hire purchase agreement. The installments act as a rent charge for the hirer to use the items in question. Since hire purchase is a financing option, interest is charged on the installments. This makes the total cost of the assets higher than the cost of a cash purchase.

4.      Down payment

Before the hire purchase dealer transfers possession of assets to the hirer, they will need a down payment. While hire purchase agreements differ, in most cases, the down payment is a small fraction of the total cost of the asset. At Kenya Credit Traders, we provide assets for as low as 10% of the cost.

5.      Repossession

Since the hire purchase dealer remains the owner of the assets, there are instances when they can repossess them. One of the major reasons for repossession is default in installments. Any other breach of the hire purchase contract can lead to repossession. The hire purchase dealer can also repossess the items when the hire purchaser voluntarily decides to surrender the assets to the owner.

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In Kenya, hire purchase is quickly gaining popularity among business owners as well as consumers. Hire purchase agreements come with a variety of names such as lipa pole pole lipa mdogo mdogo or lipa later. However, before signing a hire purchase agreement, it is essential to understand the basics. This will help you make the correct decision.

How hire purchase agreements work

A hire purchase contract is a sales agreement. However, hire purchase terms are different from a direct sales agreement. In a cash purchase, the customer pays the amount in full to acquire the asset. The buyer also immediately becomes the owner of the assets after the purchase.

Hire purchase is an option for customers who need assets and do not have the money to purchase in cash. These agreements require the buyer to only pay a fraction of the total cost. This can be as low as 10% of the total cost. After this payment, one acquires the items, but they do not own them immediately. One also pays installments to complete payment for the items. You only become the owner after the last installment.

Basics principles of hire purchase agreements

To acquire assets on hire purchase terms, one needs to follow these principles.

The first step of a hire purchase deal is the down payment. One needs to pay a deposit and sign the hire purchase contract before acquiring an asset. After paying the deposit, one not only acquires the items but they are also allowed to use them.

After paying the down payment and signing the hire purchase agreement, one acquires the assets. However, they do not become the owners of the items. One is required to take good care of the items and avoid any damage. You can also not resell the items without following the right procedure which involves the hire purchase dealer.

To complete payment for the assets you acquire on hire purchase terms, you need to make periodic payments known as installments. Installments also come with fixed interest, considering that hire purchase is a form of financing. After the last installment, one can claim ownership of the items.

The transfer of the title is done after one makes full payment of the assets. When you pay all the installments, the hire purchase dealer will transfer ownership of the items to you. Before completing the payments, ownership remains with the dealer. This means that they can cancel the hire purchase agreement when you breach the contract.

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When in the market for household goods, there is no doubt that you will be eager to determine the available options. One has to choose between a cash purchase and a hire purchase. The quality of the assets you are purchasing is also an essential consideration. It is also vital to look out for the best dealer as this increases your chances of enjoying the best services.

Household goods on hire purchase terms

One of the best decisions a homeowner will make is purchasing household goods on hire purchase terms. Whether you recently completed construction of your house, relocated to a new one, or just want to upgrade items in your current home, hire purchase is one of the best choices.

The number one reason to choose to hire purchase for household items is the chance to spread the cost. It is likely that you do not have all the cash to purchase items that you require. Hire purchase allows you to spread the cost over a given period. This also means you free some cash that you can use on other expenses.

Hire purchase is also ideal if you are in the market for household items considering that it allows you to access latest or modern items. Most people who do not have all the cash to buy household items end up purchasing low-quality goods or they avoid purchasing them completely. With a hire purchase, you can acquire all household items you require. You only need as low as 10% of the cost to acquire the items.

Benefits of Choosing Kenya Credit Traders for Hire Purchase

When in the market for household items, Kenya Credit Traders is one of the best dealers you can select. Here are some of the reasons to consider us.

1.      A wide variety of items

At Kenya Credit Traders, we have a variety of household items for you to choose from. You can choose from a wide variety of household furniture, kitchen appliances, electronics, and home entertainment devices. You can easily find items that fit your home by visiting our website.

2.      Enjoy the best hire purchase terms

When one opts for a hire purchase for household items, it is essential to find a dealer that gives you the best hire purchase terms. At Kenya Credit Traders, we offer you the best deal possible. You can acquire almost any household item with as little as 10% of its cost. The balance is paid in installments.

3.      We are accessible

It is easy to find household items that you require for your home since we have an online store. We also have many branches across the country. This makes it easier for you to access the household items you are looking for.

Hire purchase is one of the best financing options when one is unable to pay for assets upfront. When looking to purchase expensive items such as furniture, electronics, or kitchen appliances, hire purchase stands out as the best option.

Why Hire Purchase Assets

There are plenty of reasons to settle for hire purchase when looking to purchase assets. One such benefit is access to quality assets. Hire purchase allows you to acquire assets that might be out of reach when one opts to purchase in cash.

Another benefit of hire purchase is allowing the buyer to spread the cost. By paying for the assets in installments, one spreads the cost over a given duration. This also allows one to plan their finances since installments are fixed.

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Finding The Best Hire Purchase Company

The emergence of hire purchase as a way to acquire assets in Kenya has seen growth in the number of hire purchase companies. This means that a buyer will find themselves with plenty of options. This can make the process of determining the right hire purchase provider daunting. Here are some useful tips.

1.      A valid license

Before opting to acquire goods on hire purchase terms from a given dealer, there is a need to determine whether they are licensed. A license implies that the company’s operations are regulated by the country’s hire purchase act. This enhances the chances of a buyer getting quality services from the hire purchase dealer. One of the best reasons to make Kenya Credit Traders your hire purchase partner is that the company has a valid license.

2.      Reputation

Before settling for any Lipa pole pole company, it is also vital to learn whether the dealer is reliable. One can only determine the reputation of a given hire purchase dealer through customers who have interacted with the dealer in the past. Check the company’s social media handles, online ratings, and testimonials before settling on a hire purchase provider.

3.      Ease of access

The hire purchase company should also be accessible to you before you opt to hire and buy assets from them. A company with a countrywide presence makes acquiring assets for you easier. Another benefit of making Kenya Credit Traders your hire purchase partner is that we have many branches around the country. When you select assets to hire online, we deliver them to a branch near you.

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When in the market for high-value assets, one will be eager to learn their options. In cases where one has all the cash, they will only be required to find the right dealer to pay and acquire the assets that they need. However, not all buyers will have all the cash upfront. Hire purchase and leasing are some of the best options to acquire and use assets for buyers who do not have all the cash upfront.

How hire purchase works

If you are looking for expensive assets such as mobile phones, Smart TVs, furniture, and kitchen appliances, hire purchase is one of the options you need to consider. A hire purchase agreement allows you to only pay for a fraction of the cost of the goods. The balance is spread out in the form of installments which can be daily, weekly, or monthly payments.

How leasing works

Leasing is also a good option for assets that one cannot afford to purchase outright. When you sign a lease agreement, you acquire the assets you need immediately and you are allowed to use it. One will need to pay monthly rentals to the owner of the assets until the end of the lease agreement.

Leasing vs. hire purchase

While lease and hire purchase agreements allow one to acquire assets that they cannot purchase outright, they differ in some areas. Here are the key differences.

·         Down payments

In hire purchase, one has to pay a deposit to acquire the assets they intend to hire. This is usually around 10% or more of the total cost of the asset. Leasing on the other hand doesn’t require paying a deposit.

·         Installments

Hire purchase contracts are designed to make one the owner of the asset at the agreement. The installments are set depending on the principal amount and interest. In leasing, the installments are set on the basis on the cost of utilizing the asset.

·         Duration

Lease agreements can last several years. At the end of the lease agreement, the lessee and the lessor can extend the agreement. On the other hand, a hire purchase agreement only lasts months, and in a few cases years.

·         Maintenance and depreciation

When one acquires good on hire purchase terms, they take charge of repairs and maintenance of the assets. In the case of lease agreements, repairs, and maintenance can be in the hands of the lessor or lessee depending on the lease type.

·         Transfer of ownership

At the end of a hire purchase agreement, the buyer becomes the owner of the assets after paying the last installment. In the case of a lease contract, one can return the items, extend the agreement, or pay a nominal fee to acquire the assets, depending on the agreement.

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Hire purchase has become one of the best financing options available to consumers in modern times. In Kenya, hire purchase is also known as lipa mdogo mdogo or lipa pole pole. Before signing a hire purchase agreement, it is essential that a customer understands the pros and cons of hire purchase. Investing some effort and time will ensure that you are making the right choice.

What is hire purchase

A hire purchase contract is an agreement between a seller and a buyer. When purchasing expensive assets such as electronics or furniture, you might be unable to pay the total cash upfront. With hire purchase, the buyer only provides a fraction of the total cost. The balance plus interest is paid in the form of daily, weekly, or monthly payments known as installments.

Pros of hire purchase

There are plenty of reasons to consider hire purchase when looking for a high-value asset. Here are some of the benefits.

1.      Own assets at the end of the agreement

Other options when hiring assets such as a lease will see one return the assets at the end of the agreement. With hire purchase, when you pay the last installment, you own the assets.

2.      Spread the cost

The best part about hire purchase agreements is that you will spread the cost of the asset. You do not pay for the asset upfront. After paying a deposit, you can clear the balance in installments. Hire purchase also offers flexibility in how much a buyer pays monthly and the duration of the payments.

3.      Fixed interest rates

Hire purchase is one of the best financing options available, considering that buyers enjoy low-interest rates on the installments. The interest rates are also fixed and do not change at any point during the hire purchase agreement. Fixed payments allow you to budget ahead and take control of your finances.

Cons of hire purchase

Hire purchase also has some disadvantages that a customer ought to learn before signing a hire purchase contract.

1)     Higher overall cost

When you compare the total cost of items in a hire purchase deal to the cash price, the hire purchase price is higher. This is a result of the interest charges on the installments.

2)     The risk of losing the asset

With high purchase, the asset acts as the security. This means that missing any payments can see the hire purchase dealer recover the asset. The buyer loses any payments they have made to that point.\

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Hire purchase is quickly becoming one of the options when looking to own high-value assets. It is the best option for a buyer who cannot pay the full cost of the items they need upfront. In the case of a hire purchase agreement, one needs as little as 10% of the total cost. When they pay this amount, known as a downpayment, they can acquire and use the goods as they clear the amount in installments.

Hire purchase terms and conditions

There is a need to read the fine print before one commits to purchase assets on hire purchase terms. A hire purchase agreement not only provides you the chance to understand your rights, but it also makes you a smart and informed customer. When one overlooks these terms and conditions, they put at risk their money, time, and effort. In this post, we try demystifying hire purchase by looking at the common terms and conditions.

Common terms and definitions in hire purchase agreements

Terms are words used in a hire purchase agreement and here are their meaning.

1. Downpayment: This is the amount of cash a buyer initially pays to the seller. In most cases, the amount is at least 10% of the total cost of the assets. After making the down payment, one can take home the items and even use them.
2. Interest: This is the fee the buyer pays to the seller under contract. Interest arises from the fact that one is not buying items in cash. One is considered to be hiring the items during the period they are paying for the items. You only become an owner after the last installment.
3. Goods: These are movables such as equipment, furniture, kitchen appliances, building materials, and electronics that a buyer acquires from the seller.
4. Cost of goods: Cost is the cash purchase price plus value-added tax.
5. Credit amount: it is the total cost of the items that one ought to repay to the seller when paying under hire purchase terms. It includes the down payment and installments and any other fees specified in the contract.
6. Parties to the contract: These are the buyer and the seller.
7. Payment schedule: It is the arrangement set in place for repayment of the assets.
8. Payment due date: This is a set date when one ought to make payments to the seller when paying installments.
9. Installments: These are periodic payments made by the buyer to the seller. Installments can be daily, weekly, or monthly payments.
10. Fines: These are payments the buyer pays to the seller when they do not fulfill their financial obligations.

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In Kenya, hire purchase has become a common financing option for buyers looking for high-value items. The high inflation and hard economic times that citizens are experiencing make it hard to save enough cash to purchase assets outright. Hire purchase, with more common names such as lipa pole pole, lipa mdogo mdogo, or lipa later, is now a common option for most buyers. In this post, we will look at the basics of hire purchase.

Hire Purchase Meaning

High purchase is a purchase option where one doesn’t need to pay the total cost upfront to acquire assets. The buyer only pays a fraction of the total cost as the down payment and completes payment in the form of installments. While one can acquire the assets immediately after paying the deposit, one only become the owner of the assets after paying the last installment.

Features Of A Hire Purchase Agreement

These are some of the features of a hire purchase contract that differentiates it from other modes of purchase.

• A buyer acquires the assets immediately after paying the deposit.
• The hire purchase dealer remains the owner of the assets until the buyer pays the last installment.
• The total cost of the asset is made through a deposit and periodic payments known as installments.
• A flat rate interest is charged on the installments, thus making the total cost higher when compared to the cash price.
• On completion of paying the installments, the seller transfers the ownership title to the buyer.
• When the buyer defaults on payments, the hire purchase provider can repossess the asset. The buyer loses any payments they have made to this point.

• Types Of Hire Purchase Agreements

There are two main types of hire purchase agreements:

In the first hire purchase agreement type, the consumer enters directly into a hire purchase contract with the seller. In this case, a buyer makes a down payment to the seller and makes installments directly. The buyer becomes the owner of the assets after making the last payment.

In the second hire purchase contract type, a financier is involved. This is a lending institution, that purchases the asset from the seller on behalf of the buyer, and as the financier enters, into a hire purchase agreement with the buyer. In this case, the lender becomes the owner of the assets until the buyer pays the last installment.

Hire purchase calculations

The total hire purchase price is calculated using this formula:

Hire purchase price = Down payment + (Installment amount X number of installments)

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For many individuals and business owners, financial concerns are ever-present. This is especially true in modern times, considering the uncertainties of the Kenyan economy and high inflation. Most individuals are having debts as a result of loans from lending institutions such as saccos, banks, online loan apps, and chamaas. Finding a way around debts can be a daunting task for any person. It is thus vital to find ways to overcome debts. The first step towards financial freedom is avoiding getting into debt in the first place. However, debts are part of life. When not managed properly, debts can overwhelm any individual or business.

Tips for better debt management

Overcoming debts can be stressful for any individual or business owner. Financial anxiety will weigh you down unless you come up with a proper strategy for handling the debts. Here are some useful ideas to guide you and help you overcome debt burdens.

1.      Identify priority payments

There is a need to determine specific issues that keep you up at night and make them a priority when paying the debts. This will include loans, fines, rates, and taxes. This will help you avoid accruing more interest and even being against the law.

2.      Have a monthly budget

The primary purpose of a budget is to help you plan your finances and stick to the plan. Determining all your expenses and ensuring that you have a budget in place helps you have control over your finances. It also helps you determine areas where you can save money and makes you more realistic about your finances.

3.      Find alternatives to term loans

One of the reasons most people end up in debt is having term loans. The major downside of these loans is that the interest rates are not fixed, and they are likely to go up as a result of inflation. If you are looking to acquire assets for your home or business, finding alternatives to loans can be beneficial. One such alternative is hire purchase contracts.

Navigating Hire purchase towards financial freedom

There are plenty of benefits of utilizing hire purchase for asset financing. One such benefit is spreading the cost. You do not pay for assets up front, and this allows you to retain cash and utilize it in different expenses, thus avoiding a debt situation.

Another benefit of hire purchase is that items that one wants to purchase act as the security in the agreement. If you no longer require the items, you can cancel the agreement, and return the items to the hirer, and you will not be required to make any further payments.

Navigating hire purchase is also helpful when you need assets for your home, considering that it helps you create a budget. To ensure you do not end up behind the payment schedule, one creates a monthly budget for the installments and other expenses. This not only gives you control over the finances, but it also helps clear the way towards financial freedom.

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