Agreement: The asset being sold in a hire purchase agreement is generally a fixed asset. Also, the amount to be paid in this is not paid in one go.
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Hire Purchase Agreement : If you are going to make an expensive purchase, then this Hire Purchase Agreement can be useful for you, otherwise you can be in big trouble. The asset being sold in a hire purchase agreement is generally a fixed asset. Also, the amount to be paid in this is not paid in one go. In this, payment is made in installments from time to time. It is a financial instituteFinancial Institute) Not there. In this type of arrangement, the seller directly finances the buyer. For this, the seller has to borrow money on interest to give the loan to the buyer or else they leave the interest on their money. Hence, the hire purchase vendor charges interest on the outstanding amount. Due to which their loss is compensated.
Let us tell you that Hire Purchase Agreement is a financial service specially used in Commonwealth countries like United Kingdom, Australia, Canada and India. When a person buys a car on loan, the title of the car is immediately transferred to their name. If the same car when a person buys using Hire Purchase Agreement. So in this case the title of the car will not change until the entire contract is over and the last payment is made.
down payment
The buyer begins by making a down payment to the hire purchase vendor. This happens when there is a change in the possession of the asset. Down payment is not recorded for the revenue received from the sale of goods. Instead, the down payment is recorded as rental revenue. Hire Purchase Agreement keeps making monthly payments to the seller.
Such payments reflect the rent being paid for using the fixed asset instead of amortization payments that reduce the loan balance. In Hire Purchase Agreement, the hire purchase buyer keeps on paying periodic rental to the hire buyer seller. These payments are treated as rent paid for the use of the asset. This payment is not the result of the amortization schedule.
loss ownership
The hire purchase agreement does not create any loan liability on the accounts. A hire purchase buyer cannot stop making monthly payments to the seller. If they do so, the seller can take the goods back. Due to which all the payments made earlier will be useless. The ownership of the goods changes only when all the installments are paid as agreed.
When the Hire Purchase buyer purchases the asset at a pre-determined nominal sum, then an option becomes active at the end of such payment. Hence the Hire purchase buyer does not default on his obligation unless he has no other option either he has gone bankrupt or he no longer holds the value of the asset.
pre-closure of deal
It is not necessary that the hire purchase agreement should last for the entire period. Hire buyer purchaser has the option to close the deal. All they have to do is make lump sum payment of all the pending installments. This immediately activates the option to buy the asset at the nominal price. Interest can be waived on such installments. In addition, the hirer buyer gives a rebate to the seller to encourage early repayment of the loan.
English News Headline : Hire Purchase Agreement will come in handy while making expensive purchases.
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