When you buy a car or an expensive domestic appliance, you may be persuaded to enter into a hire purchase agreement. The sales representative will make more on selling you the hire purchase agreement than on selling you the car or appliance, and so may be very convincing.
However, unless you are unable to get an alternative loan, such as an unsecured personal loan, you would be better off avoid hire purchase altogether. The interest rate will be much higher than a personal loan, and the car or appliance will remain the property of the hire purchase company until ALL the payments have been made.
If you default on the payments before you have paid one third of the amount owed, the hire purchase company can recover the goods, and you will still have to make the rest of the payments if there is a difference between the proceeds of the sale of the goods and the outstanding debt.
If you have no alternative source of credit and are thinking of signing the hire purchase agreement, read the small print very carefully before you finally decide.
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