When in the market for high-value assets such as cars, homes, electronics, and household furniture, one will want to determine their options. At times, it is almost impossible to purchase such assets in a cash purchase. Paying a big amount of cash to purchase an asset can mean that one exhausts their savings leaving them no cash to spend on other essentials. The high cost can even prove prohibitive. However, financing makes it possible to acquire assets.
Different Financing Options
You will have a variety of options when looking to acquire high-value assets through financing. One of the common choices among buyers is taking a term loan. In most cases, one will need to provide security to obtain a large amount of cash. Another downside of a term loan is that the interest rates are high. The rates can also change depending on policies from the Central Bank. An increase will lead to an increase in the payments done to the lender. Most lending institutions will also check your credit score before approving financing, and this makes obtaining a term loan harder when your credit score is low.
Hire purchase is also part of the financing options when looking to acquire a high-value asset. This is usually a credit agreement between the seller and the buyer, also known as the hirer. One pays the total cost of the assets in the form of installments. During the repayment period, the dealer remains the owner of the assets. The dealer transfers the title after the buyer completes paying the installments.
Hire Purchase and Credit Score
Hire purchase is considered one of the best ways to purchase items, especially for people with poor credit ratings. The reason why hire purchase works for buyers with low credit ratings is the fact that the assets you are purchasing act as security. Failure to repay the assets will see the dealer repossess the goods. The buyer also has the chance to return the items to the dealer if they no longer need them, and they will not need to make any more payments.
There are high purchase dealers that will check your credit ratings before approving the deal. When one makes their repayments in time, the high purchase dealers will also report to the credit bureau, and this improves your credit ratings. On the other hand, failure to make payments can hurt your credit score.