Have you ever found yourself in a situation where you have to pay for goods in instalments? If you are considering signing up for a hire purchase on some items, you need to think about it thoroughly
Know the basics
When you buy items with a loan or credit card, whatever you buy belongs to you straight away. However, that’s not true with HP; you don’t own the goods until you’ve paid back all the money you owe. Your contract is with a finance company which owns the goods until the final payment is made and the company can repossess the goods if you don’t keep up your repayments. If there’s any damage to the goods, you’ll be responsible.
You should always look at other options first. Maybe you can get a better rate through a loan, or even another HP company. Compare the APR (annual percentage rate) and the total amount you’ll end up paying (fees and charges too).
Before you sign an HP contract, by law the lender must give you “pre-contract information” to take home and read. Always read the contract thoroughly before you sign it and never sign unless you’re happy that you understand and agree with everything – it should be worded in plain language.
Although your goods can be repossessed if you don’t make your repayments, you have protection too. If you’ve paid one-third or more of the total amount due, then the lender will need a court order for repossession.
According to www.moneyadviseservice.com, unfair terms are those which favour the lender over you and you need to be alert to them. Something saying you’ll have to pay the full amount if you’re late with one payment, or making charges for late payment reminders could be classed as unfair terms, because they’re heavily weighted against you. If you find any like this in the agreement, challenge them and you might want to think twice before signing the contract. If you’ve signed an HP contract which you think contain unfair terms, the best thing to do is to seek advice from a lawyer or a financial expert.
Payment protection insurance, also known as PPI, is often offered. The idea is that if you’re ill or become unemployed, the insurance will make your HP payments for you. However, this is optional — you don’t have to take it. Before you agree to it, read the exclusions very carefully — if you’re self-employed, for example, you might not be covered. Even if you decide you want PPI, you don’t have to include it in the credit deal. Instead, you pay the premium in cash, which often proves to be much cheaper.
Ending the contract early
There are a couple of reasons you might want to end the HP contract early. The first is that you want to pay it off ahead of schedule. That’s fine and if you look at your contract, it should give examples of how much an early pay-off costs. But you’ll still need to contact your lender for the exact amount and you’ll also have to pay the credit for whatever insurance you’ve taken out.
The other reason is because you can’t afford the repayments and here things become a little more complicated. Often, you can only end your agreement early if it’s for less than N5,000 and you’ve already paid at least half the total (the figure should be shown in a box on the front of your contract). Write to the lender and tell him what you want to do — terminate the agreement and return the goods. From that point you’ll only be liable for any payments you’ve missed, the credit you took out for any insurance and for any damage to the goods. You shouldn’t be charged to return the goods. If you have to physically take them back yourself, then it should be somewhere “within a reasonable distance of your home.”
This article originally appeared in the Punch website as Hire purchase rates