When purchasing assets, one has different payment plan options. There are assets that one can easily purchase in cash. However, high-value items may prove unaffordable if you are purchasing in cash. One has to explore other payment plans to acquire such assets.
Assets such as cars, a home, electronics, and machinery are considered high-value items. They will cost tens or hundreds of thousands, and it might be impossible to purchase them with cash. To acquire such items, one might consider utilizing a loan from lending institutions such as banks and SACCOs. However, there is a better option in the form of a hire purchase agreement. However, before signing a hire purchase agreement, it is essential to invest effort and time in understanding hire purchase.
Hire purchase vs cash payments
With cash payments, one needs to pay for the goods they intend to purchase in full before acquiring them. One immediately becomes the owner after a cash purchase.
In the case of a hire purchase, you do not need to have all the cash. The best hire purchase dealers, such as Kenya Credit Traders, require you to deposit as low as 10% of the total cost of the product. After paying the deposit and signing the hire purchase agreement, you acquire the products. The balance is cleared in several installments, which can be daily, weekly, or monthly depending on the agreement. After paying the last installment, one becomes the owner. Hire purchase is considered a convenient payment plan since it allows you to spread the cost.
Hire purchase vs loans
The common factor between a hire purchase and using a loan to purchase assets is interest. When you take a loan, there will be interest charged on the amount obtained. In the case of bank loans, the interest rates are regulated by the Central Bank of Kenya, and they are subject to change.
An interest rate is also changed in the case of a hire purchase. This makes the hire purchase price higher than the cash price. However, in this case, the interest rates are fixed and are not subject to regulations from the Central Bank of Kenya.
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