With hire purchase, also known as lipa pole pole or lipa mdogo mdogo, quickly becoming a favorite way to make payments, one might be eager to learn what it entails. Here we answer some of the frequently asked questions about hire purchase in Kenya.
1. What is hire purchase?
Hire purchase is a credit agreement that allows a buyer to acquire high value assets and make payments in the form of regular installments. One acquires the assets after they make an initial payment known as down payment but only become the owner after paying the total cost.
2. Are there laws governing hire purchase in Kenya?
Hire purchase agreements are governed by The Hire Purchase Act 507 of the laws of Kenya. This is a law designed to regulate hire purchase agreements. It also outlines the process of issuance of hire purchase business licenses. These law also protects the parties involved in a hire purchase agreement.
3. What is a hire purchase agreement?
It is a contract between the seller and the buyer for the bailment of goods. It outlines the rights of the buyer and the seller among other features. The agreement states the cash price of the assets and the hire purchase price.
Check the features of a hire purchase agreement here.
4. Is hire purchase leasing?
There is a difference between hire purchase and leasing. In hire purchase, one becomes the owner on paying the last installment. In the case of leasing, the hirer does not become the owner at any given point.
5. What happens at the end of the agreement?
When one makes payment for the last installment they become the owner of the assets. While one acquires the goods immediately after making the down payment, they only become the owners after making the last payment.
6. Under what circumstances can the hirer lose the goods?
There are several instances under which the seller is allowed to repossess the goods. One of the reasons for repossessing goods is defaulting payments. When you do not make the necessary payments, they not only lose the goods to the seller, but also any payments they had made.