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Hire Purchase (HP) is a
common way of paying for major items, such as, vehicle, machinery,
furniture and computers. But like any credit deal, you need to think
carefully before committing yourself. This information will help you
decide if HP is the right choice for you. It explains how an HP agreement
works and what to look out for. In cases where a
buyer cannot afford to pay the asked price for an item of property as a
lump sum but can afford to pay a percentage as a deposit, a hire-purchase
contract allows the buyer to hire the goods for a monthly rent. |
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The Advantages of
Hire Purchase
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• Spread the cost of finance. Whilst choosing to pay in cash
is preferable, this might not be possible for consumer on a
tight budget. A hire purchase agreement allows a consumer to
make monthly repayments over a pre-specified period of time;
• Interest-free credit. Some merchants offer customers the
opportunity to pay for goods and services on interest-free
credit. This is particularly common when making a new car
purchase or on white goods during an economic downturn;
• Higher acceptance rates. The rate of acceptance on hire
purchase agreements is higher than other forms of unsecured
borrowing because the lenders have collateral;
• Sales. A hire purchase agreement allows a consumer to
purchase sale items when they aren't in a position to pay in
cash. The discounts secured will save many families money;
• Debt solutions. Consumers that buy on credit can pursue a
debt solution, such as a debt management plan, should they
experience money problems further down the line.
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