Hire-purchase System

A method of purchasing an article/goods by making regular payments for it over several months/years. The article/goods ownership would be transferred to the purchaser when all the installments under hire-purchase agreement stands paid. The installments could be yearly, half-yearly, quarterly, monthly or fortnightly depending upon agreement between purchaser and hire-vendor.

Hire-purchase Conditions

* the article/goods would be delivered to the purchaser when agreement is executed.

* the goods would remain in the possession of the purchaser as long as repayment is regular.

* the purchaser has a right to use the goods under his possession.

* the payment of goods price would be in installments.

* every installment would be termed as hire charges for the goods being used by purchaser.

* Upon payment of all the installments under hire-purchase agreement, the ownership of goods would be transferred by the hire-vendor to the purchaser.

* In case of default by the purchaser in payment of any installments, the hire-vendor would take possession of goods without refunding any payment already made.

Salient Features of Hire-purchase System

* hire-purchase is a kind of finance.

* price is paid in installments under hire-purchase of goods.

* the possession of goods remain with the purchaser from the date of execution of the agreement.

* the hire-vendor continues to be owner of the goods until the last installment is paid.

* the purchaser would continue to use goods as long as payment of installments is regular.

* the purchaser may terminate the agreement by pre-paying all installments.

* the title of the goods gets transferred to the purchaser only when all the installments are paid.

Disadvantages

The purchaser ends up paying high price for the goods; it creates an artificial demand for goods; hire-vendor runs a high risk of regular payment; default may result into serious conflict between purchaser & hire-vendor; hire-purchase puts pressure on the entire family.

keep watching this space for more interesting updates on Financial Services!