If you buy a car and make a loan you will know about the term of hire purchase. In this article, I’ll share some basic information about hire purchase
What is hire purchase ?
Hire purchase is a method often used to purchase a vehicle. If you apply for hire purchase, you will be known as the tenant and the banking institution is the owner of the vehicle.
It is a loan or contract that involves an initial deposit, linked to a specific purchase, which is a way of obtaining the use of an asset before payment is completed. The payments of the HP are in monthly installment, plus interest within which at the end of the agreement, the asset is yours to purchase. (Ask.com )
The effect, if the borrower does not pay
As a borrower, it is your responsibility to pay the monthly installments on time to the institutions. If you do not pay the monthly installments, the banking institution to withdraw the hire purchase of vehicles under the following circumstances:
1. Your default payment is two installments in a row or the last installment
2. If tenant dies, the default is for four consecutive installments
The balance that you need to paid also increased because you have to pay a late payment penalty. Therefore, you need to pay installments in accordance with the stipulated time.
Responsibilities of tenants:
1. Unable to move or sell the vehicle without the consent of the banking institutions
2. Pay installments on schedule
3. Notify the banking institution in the event of any change of address
4. Not failed to insure the motor vehicle and notify the institutions on the renewal of insurance policies no later 14 days prior to the current policy expires.
Rights and obligations of the borrower
1. Repossess the motor vehicle if you default in making payment
2. Urges you to insure the motor vehicle
3 Charge additional fee to you for the purpose of enforcing the hire purchase agreement
4. Charge terms for the loan interest but the rate unchanged
Responsibilities of institutions:
1. To give you a copy of the hire purchase agreement
2. Issuing motor insurance in the name of the tenant for the first year
Things to do for tenant
1. Make sure that all agreements be in writing
2. Carefully read the agreement
3. Make sure the purchase price and terms of hire-purchase agreement are agreed upon
4. Make sure you can pay monthly installments over a period of funding
5. Make sure you know your rights under the Hire Purchase Act. It is different based on the country law.
6. Make sure you know your responsibilities under the Hire Purchase Agreement to ensure that you do not commit any act that violates the agreement
7. All documents relating to Hire Purchase Agreement as an agreement, receipts, etc. should be kept in a safe place
8. All payments must be made to a person authorized by the banking institutions
p/s:- Not all country using the same concept.. Refer to your banking institution.