Are you considering signing a hire purchase agreement? Are you interested in a lipa mdogo mdogo deal? Hire purchase is growing as an option for homeowners and business owners looking to finance assets. However, before you sign a hire purchase agreement, learning about hire purchase is worth investing effort and time.

What Is a Hire Purchase Agreement?

A hire purchase agreement is a payment contract that allows buyers to acquire goods and pay in installments. The buyer needs to first pay a certain amount of money to the dealer as a down payment. The down payment is a fraction of the total cost and can be as low as 10% of the total cost. After signing the hire purchase agreement, the buyer, the hirer, takes home the items. The remaining cost is then split into installments, spread over a given duration.

Features of a Hire Purchase Agreement

There are aspects of hire purchase agreements that make them different from other payment methods. Here are some of the features;

  • One needs to pay a down payment before they can acquire the items from the dealer.
  • You are allowed to receive and use the items after you pay the down payment.
  • You do not assume ownership after acquiring the items. Ownership is only transferred after you pay the total cost of the assets.
  • To pay the full cost of the items, the hirer, or the buyer, pays periodic payments, known as installments.
  • There is interest charged on the installments, and this makes the total cost higher than in a cash purchase.
  • The interest charged is fixed, meaning the total cost doesn’t change or the amount one pays as installments.
  • The dealer transfers ownership to the buyer once they complete payment in full.
  • The dealer can repossess the assets in a case where the buyer defaults on the payments. If there are payments done at the point where the items are repossessed, including the deposit, they will be considered as a fee for using the items.

The amount that one pays in installments depends on several factors. One such factor is the fraction one pays as a down payment. Paying a bigger fraction as a deposit means that you will have a smaller fraction to pay in installments. The duration you choose for the hire purchase agreement also has an effect on the installments. One can choose a long contract, with a smaller fee in installments, or a shorter contract with a high fee in installments.

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