Purchasing household goods can be a daunting task for any homeowner. You are not only focusing on finding quality household items to purchase, but you also want to get the best possible deal. One also wants to learn the payment options that are available to them. One might find some items unaffordable especially when trying to purchase outright.
Why hire purchase household goods
Hire purchase is a special sales and purchase system. When you choose to hire purchase, you are allowed to take home the household items after paying as little as 10% of the total cost. One is expected to meet the total cost of the item by paying fixed installments. The installments can be daily, weekly, or monthly payments. When one completes payment of the installments, they become the owner of the assets.
Difference between cash purchase and hire purchase
There are differences in the total cost of household goods when comparing cash purchases and hire purchases. The hire purchase price is always higher than the cash price. The difference occurs due to the interest charged in the case of a hire purchase.
Hire purchase is similar to taking a loan to finance a purchase. However, with a hire purchase, one pays installments with a fixed interest rate. The interest rate doesn’t change at any given time. In the case of term loans, the interest rates can change, depending on changes made by the Central Bank of Kenya.
The Impact Of Interest Rates On Household Goods Hire Purchase
The interest rates will have an effect on the total price of the household goods you are purchasing. The higher the interest rates, the higher the total cost of the items. It is thus advisable that one shops around to find a hire purchase provider that offers the best hire purchase deals.
There are a number of aspects that determine interest rates. One such factor is the length of the hire purchase contract. Choosing a long hire purchase contract will mean more interest charged each month you have to make a payment. Shorter hire purchase agreements come with fewer installments and thus save you money.
The down payment one pays when acquiring household goods will also determine the interest rates. Paying a bigger fraction of the total cost reduces the balance you need to clear, thus leading to low-interest charges.
The value of the asset is also part of the aspects that determine the interest charged. High-value assets are likely to attract more interest when compared to low-value assets.