The Pro’s And Con’s Of Hire Purchase Schemes

Hire purchase schemes are everywhere these days. So much so you may have one and not even realize it as they are not always advertised as such. The obvious and original hire purchase schemes are traditionally associated with buying a car. However, these are seen with all types of home improvement suppliers such as conservatories, extensions, and driveways. You have probably seen advertisements for sofas ‘buy now pay later’ and not realized this is actually a hire purchase scheme that they are referring to. In short it is a scheme set up to finance cars, home improvements, household items, plastic surgery, – practically most things that you can think of. Advantages of Hire Purchase Schemes Hire purchase schemes often allows you to buy big-ticket items such as a car on credit.

A simple, easy to understand method of financing a specific item. You might find this useful if you can’t borrow enough to fund your purchase through a bank loan or credit card to your credit rating or lenders criteria. You might find it easier to get credit from an HP company than from, say, a high street bank or credit card company as they sometimes hold the item as security against non payment of the finance.
Disadvantages of Hire purchase

You must be aware that you don’t own the item you have purchased until you have paid back all the money you owe. Pushy salesmen do not always make this clear. They also often hide hefty payment protection premiums in the cost as well as set up fees. Be clear on all in the credit agreement. Read all the terms and conditions. Also be aware that the HP Company can claim the goods back if you don’t make your payments. If you have paid a third or more of the value of the goods, the HP Company would have to get a court order to get them back. You may still owe money on goods that have been taken back.

Hire purchase type finance may well be a more expensive way to borrow than a good value personal loan or credit card. Shop around for the best hire purchase deals. Some deals have smaller payments and a big payment at the end. This is often referred to as a balloon payment. Therefore do make sure you will be able to cover the final payment. You can back out of the deal and return the goods at any time, but you then have to pay enough to bring your total payments up to half the price of the goods. If the installments you’ve paid already amount to that, you only have to pay for any missed payments or damage to the goods. Look at other options first.

If you can borrow the money at a similar or cheaper cost through a bank loan or credit card, steer clear of HP. Often the cheapest way to finance big ticket items such as to purchase a car is to consider a secured loan.

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