Are you a homeowner looking to acquire quality assets for your home? Are you looking to furnish your new home?

Every homeowner in the market for household appliances will be keen to learn their options. The focus is not only on finding quality appliances but also on financing options available. When a homeowner has the resources to make a cash purchase, it is the best option as they immediately own the assets after purchasing. However, in a case where a homeowner doesn’t have the cash to pay upfront, there are two main options: hire purchase or traditional credit.

How A Hire Purchase Works

A hire purchase agreement is a practical route for homeowners in need of household appliances but lacks funds for a cash purchase. A hire purchase deal allows you to take home items without upfront payments. In most cases, all that a homeowner requires is a small fraction of the cost as a down payment. They take home the assets and make monthly payments to clear the balance.

How Traditional Credit Works

A loan is also a financing option for a homeowner looking to add quality appliances to their home. In the case of a term loan, the homeowner finds a lending facility to get the funds and purchase the appliances. In most cases, your credit score plays a vital role in determining whether the loan gets approval.

Hire Purchase Vs Traditional Credit

Each of the financing options available for homeowners comes with benefits and limitations as well. Here are the key differences between traditional credit and hire purchase.

·         Interest rates

When you choose a term loan to finance household appliances, the interest rates depend on various factors such as your credit score, and base lending rates, among others. Higher interest rates make the purchase expensive. Interest rates can also change during the duration of the loan depending on changes made by the Central Bank.

On the other hand, in a hire purchase deal, the interest rates are fixed. This means that the amount that the buyer pays as an installment remain constant throughout the duration of the agreement. This is helpful as one can budget ahead and make timely payments.

·         Ease of access

Traditional loans are not easily approved. Lenders will want to check your credit score. People with bad credit ratings will pay higher interest rates or miss out on the loan.

On the other hand, a hire purchase is easy to access. In most cases, the asset one plans to acquire on hire purchase terms serves as the collateral, reducing the risk for the lenders. They can repossess the asset when one defaults on the payments. This makes them more willing to approve the applications.

Learn more benefits of hire purchase agreements here. Follow Kenya Credit Traders.