A hire purchase contract is a financing or credit agreement. It is one of the popular ways to purchase expensive items where you acquire the products and make payments later in the form of installments until the full cost is paid off. In Kenya, hire purchase agreements are duped lipa mdogo mdogo or lipa pole pole. It is becoming a favorite way to purchase assets such as TVs, phones, appliances, electronics and even high value assets such as cars and houses.
Hire purchase as an alternative to leasing
Leasing means renting an asset for a given period. At the end of the contract, you will return the asset to the owner. Hire purchase allows you to hire assets for use, and at the end of the contract, you become the owner.
Ways Hire Purchase Offers You a Better Financial Deal
There are plenty of benefits you enjoy by opting for hire purchase for financing your assets. Here are some hire purchase financial breathers.
Access quality products
Are you looking to upgrade the TV in your home? Do you need a quality dining set for your new home? At times, you can find the cost of upgrading your assets enormous. However, hire purchase allows you to acquire these products by paying a fraction of the total cost. Even when you do not have all the cash, you can purchase quality products and clear the balance in the form of installments.
Improved cash flow
High-value assets can come with adverse impact on your finances if you choose to purchase them outright. They can deplete your savings, salary and at times leave you with loans to pay. Hire purchase allows you to manage your cash flow, since you make payments according to frequency of your income.
Lower interest rates
The difference between hire purchase and cash purchase is interest charged. Hire purchase will cost you more than a cash purchase. However, the rates charged in hire purchase are considerably lower when compared to credit cards, overdrafts, term loans and other credit arrangements. The best part is that hire purchase payments are fixed and interest rates are not subject to change as is the case with term loans.
Another hire purchase financial breather is the flexibility one enjoys by choosing hire purchase. One can choose whether to pay their installments daily, weekly, monthly or even annually depending on the assets they are purchasing.