Hire purchase, like any other financial decision, has benefits, disadvantages, and pitfalls. Hire purchase remains one of the best asset financing options for consumers and business owners. The many benefits of hire purchase agreements motivate buyers to consider this purchase option. However, when you are not keen, you can end up making a mistake that will prove costly.
What Is a Hire Purchase Agreement
A hire purchase agreement is a contract between a hirer and a dealer that allows the hirer to acquire goods without paying upfront. Before acquiring assets, the hirer has to pay a deposit to the dealer. After the deposit, the hirer clears the balance in installments.
Benefits of hire purchase agreements
There are different benefits that will motivate a hirer to sign a hire purchase agreement. Here are some of the benefits.
· Quick access to items:
Hire purchase ensures you can access items even when you can’t afford to pay in cash. By choosing hire purchase, you only need to pay the deposit and prove you can afford the installments.
· Flexible and affordable repayments
Another major benefit of a hire purchase deal is that the repayments are flexible and affordable. You can negotiate with the dealer to get a deal tailored to suit your needs.
· Access quality assets
Lack of enough funds can lead to a buyer settling for low-quality items. However, hire purchase makes even the most expensive assets affordable through spreading the cost. This means you no longer have to compromise quality due to lack of enough funds.
Hire Purchase Pitfalls
While hire purchase has so many benefits, there are also pitfalls that a buyer ought to consider. Here are some pitfalls and how to avoid them.
1. Hidden charges
There are hire purchase dealers that have hidden costs when you choose them. The downside of the hidden charges is that they increase the total cost of the assets. To avoid this pitfall, there is a need to check the contract thoroughly and understand all the charges before signing.
2. Discretionary purchases
At times, one can be tempted by the benefits of hire purchase deals to spend on items they do not need. It is always advisable to only spend on assets that will improve your home or enhance productivity in your business.
3. Rogue dealers
When you are not keen, you can end up in hands of scammers. It is always desirable to carry out due diligence and settle for reputable dealers such as Kenya Credit Traders. Only choose a hire purchase company that is licensed.
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