There is no doubt purchasing household electronics on hire purchase terms is one of the best decisions one can make. Hire purchase, or lipa pole pole, allows a buyer to access items that they might not afford to purchase outright. With as little as 10% of the total cost of the electronics you intend to purchase, you can acquire them for your use immediately. One can utilize monthly, weekly, or daily payments to clear the balance. The periodic payments are referred to as installments.
Interest Rates in Hire Purchase
Hire purchase agreements are similar to rent to own agreements. Every installment one pays counts as the cost of hiring the asset for the given period. However, with hire purchase, one becomes the owner of the electronics after they make payment for the last installments.
The total cost of electronics in hire purchase is higher than when one makes an outright purchase. The difference in the costs results from interest rates charged on installments in hire purchase.
Before signing the hire purchase agreement, spending time understanding the interest rates and repayment terms ensures that you are making the right decision.
Factors That Affect Interest Rates in Electronics Hire Purchase
- The down payment: When one pays a high amount as a down payment, they will have a smaller balance to clear, and this means lower interest rates for the hirer.
- The total number of installments: When one opts to pay the balance in a high number of installments, the interest rates will be lower.
- The cash price of the asset: the hire purchase cost is always affected by the cash price of the asset. High value electronics are always likely to attract higher interest rates compared to low value electronics.
- The duration of the hire purchase agreement: When the repayment period is spread over a longer duration, the interest rate is likely to be lower than in the case of a shorter repayment duration.
In hire purchase, the hirer can only become the owner of the electronics after the last payment. When you identify electronics you plan to purchase, the dealer requires a down payment. This can be as low as 10% of the total cost.
The balance is cleared in the form of installments. Some dealers accept daily payments, weekly payments, or monthly payments. The periodic payments are known as installments. When you complete repayment, the dealer transfers ownership of the electronics.