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Hire
Purchase (HP) is the traditional way to finance a equipment
purchase. You pay off the entire price of the equipment
through a series of monthly payments. At the end of the
contract period the equipment becomes your property.
The monthly payment is determined by the amount of deposit
paid, the period of the contract and the sale price of the
equipment.
HP is very similar to borrowing a sum of money from a bank and
paying it back over a fixed period of time, with interest.
Hire purchase is a type of secured loan which are often
preferred over alternative (unsecured) loans because they
allow a greater borrowing limit. The term "secured loan" means
exactly that, a loan that the lender can secure against an
asset (in this case, a machinery).
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