Hire purchase, as well as term loans, are options when one is looking for financing. Whether you are out to buy assets for your home or business, you will be keen to learn about available financing options.

Assets such as Smart and digital TVs, home furniture, smartphones, or a fridge might prove costly. Hire purchase offers you the chance to acquire these items at a fraction of the total cost. The balance is usually paid in monthly installments.

On the other hand, you can obtain a loan from an accredited financial institution such as a Sacco, a bank, or even an online or mobile service lenders such as M-Shwari. In some cases, you will need to provide collateral for the loan. After obtaining the loan, you can use the cash to purchase the item you desire.

Differences between Hire Purchase and term loans


When you choose hire purchase to finance assets for your home or business, you will obtain full ownership of the items after paying the last installment. This means that the buyer can resell the items if they run into financial problems. On the other hand, when you obtain a loan and purchase the items in cash, you get full ownership of the items. You will thus have the ability to resell the items whenever the need arises.

While hire purchase doesn’t give full ownership of the items immediately after purchase, it still has some benefits. You will acquire the items immediately and have a chance to use them before making the last payment. If you are looking for a microwave, you have a chance to enjoy warm food while you clear the balance.

The total cost of the asset

The cost of assets to the buyer when they choose to hire purchase is the normal cash price plus the HP interest. The interest charged is usually favorable considering the duration that one is allowed before fully paying for the asset.

On the other hand, loans can be exploitive due to the high interests charged. In most cases, if you are looking for short-term loans, they do not require collateral. However, the loans come with high-interest rates. This will only make an asset more expensive.

Visit Kenya Credit Traders Limited to learn more about the benefits of Hire purchase. You can also view the latest products on offer on our Facebook Page, Kenya Credit Traders.