Hire purchase is one of the common ways to acquire high-value assets in modern times. One can buy a car, a home, furniture, appliances, or even electronics using a hire purchase agreement. Under a hire purchase contract, one acquires the goods after paying a down payment. This can be as low as 10% of the total cost of the goods. The agreement allows you to pay the purchase value of the goods within a given period through installments.
Ownership of goods under hire purchase
While one has a chance to utilize goods immediately after acquiring them, they do not become the owners of the assets outright. The hire purchase provider remains the owner of the goods during the hire purchase period until one completes payment. This means that you cannot resell the goods since the title remains with the hire purchase dealer.
Before signing the hire purchase agreement, it is essential that one understands their rights as well as duties. The hire purchase act outlines the rights and duties of the buyer. One of the duties of the buyer is to make payments within the agreed period. Failure to make the set payments will mean that one is defaulting.
Hire purchase arrears
When one has arrears on their hire purchase agreement, it is likely that the hire purchase dealer will follow up for payments. In some cases, they will grant an extension, or you can discuss a reasonable period during which you can clear the arrears.
When one doesn’t comply with the agreed terms, they are served with a default notice. One can get a default notice if they do not arrange terms with the hire purchase company or when they do not make any payments within 3 months.
What happens with defaults on hire purchase?
When one gets a notice of default, it is likely to lead to the repossession of the goods by the seller. In some cases, the seller might require a court order to repossess the goods. However, this is not a requirement, especially when you have not paid even a third of the sum owed.
When the seller repossesses the goods, they can resell them at an auction and use the proceeds to pay off your debt.