Hire purchase remains one of the best finance options one can utilize when looking for household furniture, electronic gadgets, kitchen appliances, and other high-value items. But what is the impact of your credit score on hire purchase eligibility?

Home and business owners turn to financing when they intend to acquire high-value assets. Some of these assets are costly, making it impossible to pay for them upfront. Even when one can pay for these assets in cash, it might deplete their savings and leave them exposed in the case of an emergency.

Why Choose Hire Purchase?

There are plenty of benefits that will motivate a buyer to choose hire purchase financing for items they plan to purchase. One such benefit is flexible payments. Hire purchase dealers offer flexible repayment schedules depending on your income. Hire purchase also allows you to spread the cost of the assets. The best part about hire purchase is that one can access financing even when they do not have the best credit ratings.

Hire Purchase Vs the Credit Score

One of the reasons why most people settle for hire purchase instead of other financing options is their credit score. In traditional financing, lenders will always check your credit rating before they can approve a loan. People with poor credit ratings usually miss out on loans or they get loans at high interest rates. The purpose of credit rating is to inform the lender of how likely the buyer is to repay the loan.

When you are looking to acquire assets using a hire purchase agreement, some dealers consider your credit rating before signing the agreement. However, most dealers will sign the hire purchase deal even when you do not have the best credit score. This is partly because the items that one is purchasing will be collateral. The debt is secured against the items that one hires from the hire purchase company. However, this doesn’t mean that there is no impact of your credit score on hire purchase eligibility. Buyers with a high credit score will have higher chances of having their hire purchase deal approved.

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Are you considering purchasing items on hire purchase? Is it the right decision? Any consumer looking to acquire assets will want to make the right decisions. Before signing any agreement, it is vital to check how it will benefit you. If you are considering a hire purchase deal, ensure you get a consumer’s perspective on hire purchase deals before making your final decision.

How Consumer Hire Purchase Works

A hire purchase agreement allows a buyer to acquire items they need but can’t purchase outright. The hire purchase dealer requires a down payment to allow the customer to acquire the items. This makes hire purchase ideal for items such as TVs, computers, pieces of furniture, kitchen appliances, and other valuable items. After paying the deposit, the buyer can acquire the assets and even has a right to utilize them.

When one acquires items on hire purchase terms, during the duration of the contract, they will be hiring them. Consequently, one doesn’t become the owner of the items even though they have acquired them and are using them. However, at the end of the hire purchase agreement, the dealer transfers the title to the buyer, thus making them the owner of the assets.

Benefits Of A Hire Purchase Agreement For Consumers

Looking from a consumer’s perspective, hire purchase has numerous benefits.

·         Purchase quality products

Hire purchase agreements allow customers to acquire assets without paying upfront. This means one can purchase even expensive but quality items instead of paying upfront and settling for cheaper assets.

·         Spread the cost

By choosing hire purchase, one has a chance to pay for items in installments. This makes it easier to pay for assets and even leaves you some funds to use on other expenses.

·         Own the assets at the end of the agreement

Hire purchase, unlike leasing, allows you to own the assets at the end of the agreement. Once you pay all the installments, the seller transfers ownership to you.

·         Enjoy low interest rates

Choosing hire purchase over other financing methods ensures you enjoy low-interest rates. These are fixed rates, meaning the cost doesn’t change during the duration you are repaying.

Drawbacks of hire purchase

Hire purchase also has limitations for consumers looking to buy new assets. The major drawback of hire purchase is a higher total cost than in the case of a cash purchase. This is a result of the interest charged on the installments.

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Every financing option has benefits and drawbacks, and hire purchase is no exception. Before signing the agreement, it is also vital to check any pitfalls in hire purchase agreements and avoid them.

Hire purchase remains of the best financing options available for home and business owners. Hire purchase financing allows buyers who cannot purchase assets upfront to pay for them in installments.

How Hire Purchase Works

It is vital to learn how hire purchase works before choosing it as your financing option. The first step when looking for assets is determining the items you want to purchase. One then determines if there is a hire purchase dealer selling them or they will need to seek financing from a traditional lender.

Hire purchase dealers such as Kenya Credit Traders sell a lot of items you need for your home or office. The dealer only requires you to deposit 10% or more of the total cost of the items you intend to purchase. Beside the deposit, one also pays installments periodically to pay for the items fully.

Common Pitfalls in Hire Purchase Agreements and How to Avoid Them

There are several mistakes that buyer do when they are looking for a hire purchase deal. Here is a look at these mistakes and how one can avoid them.

The number one mistake most buyers make when signing a hire purchase agreement is ignoring the fine print. Some buyers do not take time to read the hire purchase agreement and end up rushing to sign. This can increase the cost of items due to hidden charges and costs by some hire purchase dealers. Always ensure that you understand the terms and conditions before signing the hire purchase agreement.

Another common pitfall for buyers signing a hire purchase agreement is buying items they do not need. The excitement of getting new assets, electronics, or appliances can lead to one signing a hire purchase agreement. By the them they choose to cancel the contract, they will have paid a deposit, some installments and even an early termination fee.

It is also common for buyers to end up as victims of fraud when they are looking for hire purchase deals. The best way to ensure you do not become a victim is ensuring that you only work with a licensed hire purchase dealer such as Kenya Credit Traders.

How is hire purchase different from traditional financing? Which is the better option when looking to acquire assets for a home or business?

When in the market for a high-value asset, one will be keen to find out financing options available to them. While there are buyers who choose to buy assets in cash, it is not always possible, especially when it comes to high-value items. Some of these items include cars, homes, furniture, electronics, kitchen appliances, and other household items. Hire purchase is one of the finance options available in today’s market.

How Traditional Financing Works

Financing involves looking for a short- or long-term loan from traditional lenders to purchase items that you require. In some cases, when one chooses financing, the assets they acquire act as collateral for the loan. However, this is not always the case as some lenders can provide unsecured loans.

How Hire Purchase Works

Hire purchase is usually a purchase contract between a hire purchase dealer and a buyer looking to acquire assets. In this purchase contract, the buyer pays a deposit as low as 10% of the total cost of the items they intend to purchase. The hire purchase company delivers the items and they have a right to use them. However, one doesn’t automatically become the owner of the assets they are hiring. The dealer remains with the title and only transfers it to the buyer when they pay all the installments.

How hire purchase is different from traditional financing

Hire purchase is a form of finance when looking to acquire assets, but it varies from traditional financing in the following ways.

·         Ownership of the assets

In traditional financing, one gets cash from a loan and uses it to purchase assets. This means that they pay in cash and ownership is transferred to them from the seller. In some cases, the assets act as collateral for the loan and the lender may possess them when you do not repay the loan.

On the other hand, the hire purchase dealer only transfers ownership of the assets when one pays all the installments. They remain the owners of the asset through the contract and can repossess the assets when one fails to honor the contract and make payments.

·         Interest rates

In the case of traditional financing, one acquires a loan from a lender. The lending rates are subject to changes depending on the Central bank’s base rates. This means that the interest rates can increase or decrease at some point. Hire purchase on the other hand comes with a fixed interest rate. This means that the installments do not change with time, and one knows the total value of the asset they are purchasing even before signing the contract.

Kenya Credit Traders is your leading hire purchase dealer in Kenya.

Do you intend to acquire household items on hire purchase terms? As is the case with any financial decision, before opting for a hire purchase agreement, one should learn the risks and drawbacks of a hire purchase deal. It is essential to understand how hire purchase works before signing the agreement.

How does hire purchase work?

A hire purchase contract allows homeowners to hire assets that they require and end up as the owners. When one identifies the assets they require for their home, a hire purchase dealer will require them to pay a down payment. This is a fraction of the total cost of the assets and can be as little as 10% of the total value.

The major reason why most homeowners opt for hire purchase when looking to acquire household items is the opportunity to spread the cost. After paying a deposit, one pays the remaining cost in the form of daily, weekly, or monthly installments. However, there are some risks of using a hire purchase agreement.

Disadvantages Of Hire Purchase

·         Higher cost in comparison to purchasing upfront

Spreading the cost of the items you are purchasing is one of the biggest reasons why people choose hire purchase. However, installments that a buyer pays to the dealer come with an interest rate. While the interest rates for hire purchase deals are usually low, they will still make the price of the assets to be higher than what a customer pays when purchasing in cash.

·         You do not automatically own the goods after acquiring them

When one chooses hire purchase to obtain assets, they acquire them at only a fraction of the cost. After acquiring the items, one has the right to use them. However, one doesn’t assume ownership immediately. The buyer hires the assets from the hire purchase dealer. This means that you cannot resell the assets without the authorization of the hire purchase dealer. However, when you pay the last installment, you become the owner of the assets.

·         Commitment to fixed payments

When you sign a hire purchase deal, you will be paying daily, weekly, or monthly payments to clear the cost. The payments are fixed throughout the hire purchase agreement. In any case where your financial situation changes, you may strain to meet the obligations. Lack of payment will see the dealer repossess the assets.

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Are you considering a hire purchase deal for assets to use in your home or business? Is it right for you with KCT as a hire purchase partner? As with every financial decision, before opting for a hire purchase deal, it is vital to determine the benefits and make the right decision.

How does hire purchase work?

A hire purchase agreement is a finance option allowing you to spread the cost of assets you intend to purchase. When one takes out a hire purchase contract, they deposit as little as 10% of the value of the items they plan to acquire. One clears the cost of the items through daily, weekly, or monthly payment installments over a fixed duration. The duration of the hire purchase agreement depends on the percentage of money that one pays upfront as a down payment, your income, and several other factors.

Benefits of hire purchase

Before signing a hire purchase deal, one will want to determine the benefits they are set to enjoy. Here are some of the advantages.

·         Spread the cost

Hire purchase is the right option if you do not intend to pay for assets upfront. After paying the deposit, one clears the balance in periodic payments. These payments can be daily, weekly, or monthly. One also enjoys the flexibility in how much they will pay as a daily, weekly, or monthly installment, and the duration that the agreement will last.

·         Access new high-quality assets

Hire purchase makes it possible for home and business owners to acquire expensive and quality assets. When buying in cash, you can be limited in choice by the amount of cash you can spend. With hire purchase, you can acquire assets that are expensive right away and pay for them later in the form of installments.

·         Own assets at the end of the hire purchase agreement

You do not obtain the title of the assets you acquire on hire purchase terms immediately after signing the agreement. The ownership remains with the hire purchase dealer. However, after one pays the last installment, the ownership of the goods is transferred to them.

·         Enjoy fixed interest rates

One also benefits from fixed interest rates when one acquires goods on hire purchase. Changes in bank and base rates will not affect the total cost of the items you are acquiring. This allows you to budget accordingly for the payments since you can determine the total cost of the items upfront.

Get the best hire purchase deals at Kenya Credit Traders.

Hire purchase, like any other financing option, has pros and cons. Before opting for a hire purchase when purchasing assets for your home or business, it is advisable to check the benefits and the drawbacks.

What is a hire purchase?

Hire purchase is a purchase agreement allowing buyers to acquire assets at a fraction of the total cost and spread the cost over an extended duration. Buyers without enough cash to purchase items upfront can opt for hire purchase. In this arrangement, the buyer pays a down payment, of as little as 10% of the total cost, and pays the balance in the form of installments. Here are some pros and cons of using hire purchase.

Benefits of hire purchase

Hire purchase has many benefits to buyers looking to acquire high-value assets. Here are some of these benefits.

·         Acquire high-value assets

Hire purchase makes it possible for buyers to obtain assets that they can’t manage if they opt to buy upfront. Refrigerators, furniture, electronics, kitchen appliances, and other items are costly. When buyers can’t raise cash up front, they end up opting for low-quality, cheap alternatives. Obtain your dream assets using hire purchase by only paying as little as 10% of the total cost at Kenya Credit Traders.

·         Spreading the cost

Another major benefit of hire purchase is spreading the cost. After paying the down payment, the cost is spread in the form of daily, weekly, or monthly payments.

·         Manage your cash flow

Hire purchase allows you to manage your cash flow. When purchasing assets in cash, one might utilize all their savings or their income. This will mean that one doesn’t have enough funds for another project or an emergency. With hire purchase, the cost is spread into small and payable amounts every month, thus freeing some cash to use on other activities.

Disadvantages Of Hire Purchase

Hire purchase also has some drawbacks. Here are some of these disadvantages.

·         Higher cost in comparison to the cash price

When one opts to acquire assets on hire purchase terms, the total cost is usually higher when compared to purchasing up front. This is due to the interest charged on the installments.

·         The risk of losing the assets to the dealer

One does not become the owner of assets immediately after acquiring them from the hire purchase dealer. During the period when one pays the installments, they are hiring the assets from the dealer. If you do not pay the installments, the dealer will repossess the assets and you will lose any payments you have made to that point.

Find out more benefits and drawbacks of hire purchase here.

Hire purchase is one of the best financing options a buyer can utilize in modern times. However, like in the case of other financing options, one wants to have a good understanding of hire purchase before choosing it as a financing option. Today we answer the questions about the basics of hire purchase deals.

What is hire purchase?

Hire purchase is a purchase contract where a buyer obtains assets after paying a downpayment to the seller and clears the balance in installments. One hires a fixed asset to utilize and completes payment through periodic payments. At the end of the hire purchase deal, a buyer becomes the owner of the asset.

Basics of hire purchase agreements

·         Downpayment

When one aims at acquiring assets through hire purchase financing, the first step will involve paying a fraction of the total cost of the items. This can be as little as 10% of the value of the items. However, the rate changes from one hire purchase dealer to the other.

·         Acquiring and using the assets

Hire purchase agreements help a buyer to obtain items without paying for them outright. After one pays the deposit and signs the hire purchase agreement, they acquire the assets. In some cases, the hire purchase dealer delivers the assets. After obtaining the assets, one can also utilize them. The installments thus serve as the hiring charge.

·         Installments

After obtaining assets from the hire purchase dealer, one makes periodic payments. These are hiring charges, but they count towards realizing the cost of purchasing the assets. Installments can be daily, weekly, or monthly payments.

·         Ownership of the assets

The buyer obtains the assets immediately after the downpayment but they do not assume ownership. They are considered to be hiring the assets. Until one pays the last installment, they are considered to be hiring the items. Failure to make payments causes the hire purchase dealer to repossess the assets. On paying all the installments, the seller transfers the title to the hirer.

Kenya Credit Traders is your number one hire purchase dealer. Visit our blog page for more insightful articles on hire purchase agreements.