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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.

The Disadvantages of Hire Purchase

• Personal debt.
A hire purchase agreement is yet another form of personal debt. it is monthly repayment commitment that needs to be paid each month;

• Final payment.
A consumer doesn't have legitimate title to the goods until the final monthly repayment has been made;

• Bad credit.
All hire purchase agreements will involve a credit check. Consumers that have a bad credit rating will either be turned down or will be asked to pay a high interest rate;

• Creditor harassment.
Opting to buy on credit can create money problems should a family experience a change of personal circumstances;

• Repossession rights.
A seller is entitled to 'snatch back' any goods when less than a third of the amount has been paid back. Should more than a third of the amount have been paid back, the seller will need a court order or for the buyer to return the item voluntarily.

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