If you are in the market for household goods, you will always have options. There are plenty of stores selling household items in Kenya. However, these assets vary in quality. One will be eager to get the best quality to bring home. Apart from quality, one also focuses on finding the best deal. Some of the quality household items will cost more than one can afford, and this has led to buyers settling for low-quality goods. However, in modern times, you do not have to settle for less, considering that there is a better way to make payments in the form of hire purchase financing.
What is a hire purchase?
Hire purchase is known as lipa mdogo mdogo or lipa pole pole in Kenya. This is a method of payment for goods where one only initially pays a fraction of the total cost of the asset. This is usually as low as 10% of the cost. Afterward, one pays the balance in the form of fixed installments. Installments can be daily, weekly, or even monthly payments.
Pros of hiring household goods under hire purchase
There are plenty of reasons to consider hire purchase when looking to buy household items. Here are some of the benefits.
· Access quality household goods
If you opt to purchase items in cash, you will be limited in choice by the amount of money available to spend. However, with a hire purchase, one gets the chance to access expensive and quality items and use them right away.
· Spreading the cost over a fixed term
The option to clear the balance in installments allows you to spread the cost of the goods. One can choose daily, weekly, or monthly payments depending on their income. This helps you avoid using all the cash in purchasing household items, which you can use in paying other bills or other expenditures.
· Fixed interest rates
With hire purchases, the interest rates are fixed throughout the payment term. The interest rates are not affected by changes in rates set by the central bank of Kenya. One thus knows the total cost of the household items and thus budgets accordingly.
· Own the asset at the end of the agreement
Unlike leasing where the hirer returns the assets to the owner, with hire purchase, the buyer becomes the owner after making the last payment.
Disadvantages of hire purchase
Here are some downsides of utilizing hire purchase to acquire household items.
· The loan is secured against the goods
Hire purchase agreements are contracts, and one only becomes the owner after completing the payments. When one cannot afford payments, they lose the asset to the seller as well as their payments.
· Assets cost more overall
The interest rates charged on household goods mean that the total cost is higher than purchasing in cash.