Credit is without a doubt a vital financial solution in acquiring goods for individual as well as business use. At some point, we all need credit products for our day to day lives. When we need items, but we do not have all the money to buy outright, we choose to find a credit solution. One of the best agreement common in modern times is hire purchase. It works for clients looking to purchase items that require a large amount of cash to purchase.
How Hire Purchase Works
The first step in hire purchase requires the buyer identifying the assets that they require. Afterwards, they identify dealers that accept hire purchase as a method of payment. Kenya Credit Traders is the leading hire purchase company for a variety of assets you require for your home or business.
When you identify the dealer, the next step involves acquiring the asset. To obtain an asset, the buyer needs to make a down payment. After making this down payment, the buyer obtains the asset for their use. However, they do not become the owner of the assets outright.
To clear the balance, the buyer and the dealer negotiate the period of repayment. The buyer makes payment in the form of installments. This can be daily, weekly or monthly installments. One becomes the owner of the items after they paying all the installments. In a case where one defaults payment, the seller has the right to repossess the assets and the buyer losses any payments they have made.
Types of Hire Purchase Agreements
Hire purchase agreements are classified depending on the intended use of the assets. An agreement is classified as either a consumer hire purchase or industrial hire purchase.
· Consumer hire purchase
This is a type of hire purchase where the buyer rents goods for personal use. The buyer in this case uses the assets for their home. It also involves individual buyers and not a business or company. The assets are not used for business transactions.
· Industrial hire purchase
This is a transaction between two companies. The financing or lending institution leases the assets to another business for industrial or business use. The buyer has an option to purchase the asset later. Industrial hire purchase comes with fixed monthly payment, allowance for early settlement, and in some cases, a variable interest rate on the monthly installments.