Hire purchase remains one of the financing options available to homeowners and business owners. There is an increase in customers opting for hire purchase over other financing options available. This is partly due to the many benefits that hire purchase offers in comparison to traditional financing options.
How Does Hire Purchase Work
A hire purchase agreement involves acquiring assets by paying only a fraction of the cost. The initial amount that one pays to acquire the items is a down payment. The remaining cost is split into equal installments. The assets functions as the collateral and one doesn’t become the owner immediately after acquiring the asset. As such, hire purchase doesn’t have complex requirements as is the case with traditional loans. The dealer can repossess the asset in a case where one defaults.
The Role of Hire Purchase in Economic Inclusion
What is economic inclusion?
Financial or economic inclusion means that business as well as individuals can access affordable and essential financial products and services for their needs. It means that individuals, regardless of their occupation, social status, and location and benefit from financial services.
Traditional lenders leave a gap in economic inclusion. Studies show that a majority of the population are not formally employed. A big percentage also lacks transactional accounts. These are the primary considerations for traditional lenders when providing financing services. As such, a majority of consumers remain underserved. However, Kenya Credit Traders is attempting to bridge the gap with economic inclusion.
How Kenya Credit Traders Ensure Financial Inclusion Through Hire Purchase
The first step towards financial inclusion is financial literacy. There is a need to educate consumers about various financial products and services available to them, and how they can benefit from them. A conscious customer makes informed decision and a long-term plan for their finances. KCT is educating customers about hire purchase deals through weekly updates on their blog.
Another way KCT promotes financial inclusion is through offering hire purchase as an alternative to traditional loans. In most cases, consumers with not credit history or poor credit scores miss out on financing. However, hire purchase offers such customers a chance to own assets as the credit score is not a primary consideration.
Another role of hire purchase in economic conclusion is offering affordable terms for consumers looking to acquire assets. Hire purchase not only offers fixed interest rates, but the payment structure is also flexible.
