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.