Hire purchase and conditional sale

Hire purchase and Conditional Sale is to purchase goods by signing an agreement to own the goods outright after the goods are paid in full in monthly instalments

Hire Purchase is a kind of borrowing. You sign an agreement to purchase the goods by paying monthly instalments. Although the goods remain with you, you do not own it until the amount you have borrowed is paid in full. You are not allowed to sell or dispose of the goods without the lender’s permission. If you do, you are committing a criminal offence.

If you fall behind with the payments, the lender can repossess the goods as per purchase agreement.

Conditional sale is similar to Hire Purchase. There is an agreement between lender and you that usually includes the condition that the goods do not belong to you until you have settled your final instalment. The lender can repossess the goods if you fall behind with your payments.

You have the right to end a hire purchase or conditional sale agreement by informing in writing and returning the goods at any time. You have to make sure all the instalments are paid up to the time you end the agreement.

If you are struggling to meet your monthly repayments, it may be better for you to end the agreement and limit your loses as you may end up owing more. Please make sure you check your agreement document if you are covered for Payment Protection Insurance (PPI) and can claim to help you make payments.

At the time of returning the goods if you have made payments less than half of the total price of the goods, you may have to pay further amount under the agreement. If you have paid more than half of the price when you end the agreement you will not have to pay any more but unfortunately you are not entitled to any refund.

The credit agreement is the legal document and therefore before taking any action it is always beneficial to check the original credit agreement and get help if necessary. The document should show the total price of the goods including interest, your monthly instalment and the amount you have to pay if you end your agreement before time.

The lender can repossess the goods by ending the agreement if you have not kept up with the repayments. The lender will apply for a court order to repossess the goods. No court order is required if you have paid less than one third of the total amount of the goods. The agreement should state what is one third of the amount required.

The repossessed goods are normally sold at the auction and they amount collected will be used to repay your debt. If there is a shortfall and your debt is not settled, you will have to pay the remaining amount plus any court costs involved. If you have a client who is willing to buy the goods to cover the full cost of your debt, there is no harm in informing the lender as this will be beneficial to both of you. The lender will not have to pay commission to the auctioneer and you will be certain that you do not have to pay any further monies to your lender.

Finally make sure you cancel your Payment Protection Insurance (PPI) in writing if your lender or you end the hire purchase or conditional sale agreement.

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