A hire purchase agreement is a type of loan, in which you agree hire the goods and to pay the lender set instalments until you have repaid the amount in full or until you wish to end the agreement and return the item to the lender. The lender still has rights over the item until you have repaid all your instalments; you are unable to sell on the item or dispose of the item. Furthermore, they can repossess the item if you do not make your payments. Once you have paid for the item in full you will be the official owner of the item.
Hire purchase can be an extremely useful option when you are starting up a business and require extremely expensive machinery or equipment to get the venture off the ground. Hire purchase can be seen as a long term investment as over time the equipment will eventually become the property of the company. You also have the ability to end the agreement officially via writing if you no longer afford the repayments, or you no longer require the equipment. However, you must be aware of the small print when it comes to hire purchase. If you terminate the agreement having paid less than half of the full amount back to the lender, you may owe them the difference between what you have paid and 50% of the total amount. If you have paid the lender over half of the full amount you owe, you can terminate the agreement without having to make any more payments to the lender but you are unlikely to receive a refund.
Your credit agreement is an important and vital point of reference when dealing with hire purchase agreements. The agreement will outline what amount your repayments are, the threshold amount you have to repay before your lender has to get a court order to repossess the item, and whether you can claim for help with your repayments under your payment protection insurance (PPI) should you have been off work ill etc.
Hire purchase agreements are commonly offered for furniture and vehicles, so if you need a car, van or heavy plant machinery for your business, hire purchase is a brilliant option for you as these items can be seriously draining on your start up funds. If your business prospects are in the agricultural sector or the construction industry you should be able to find all most all of the equipment you need available under hire-purchase contracts. This could be a huge weight off your mind. If you are considering hire-purchase make sure you are focusing the agreements on to items you are going to need for the long term, also ensure you can afford the repayments.