Hire purchase, or HP as it is a commonly known, is a way to pay for expensive items such as cars, furniture and computers. With an HP agreement, you are hiring goods but with an option to buy once you have paid off all the instalments. Until you do, you will not own the goods and you cannot modify or sell them without the lender’s permission. You will be responsible for any damage to the goods during the contract period.
Your contract is with a lender, not the store that sold you the goods, and they own the goods until the final payment is made. The lender can take the goods back if you do not keep up repayments, although they will need a court order if you have paid more than one third of the total cost. If you have paid more than half the total cost, or pay up to that level, you can end the agreement and return the goods at any time.
It can be easier to get credit from an HP company than a bank or credit card company, but it is generally a more expensive way to borrow, especially if you want to buy the goods as the final fee may be high.
If you are comparing hire purchase deals, always check what the APR rate is, as any fees and charges will need to be paid.
Baines and Ernst Ltd