HP is a legal term for contract where people can pay only a percentage of the predetermined amount at a time (fixed installments, usually repay in monthly basis) for an agreed duration of time (loan period), to own for expensive goods such as a car, home appliances or business equipment, without having to pay a lump sum at the point of receiving the goods. In layman term, it is also known as Car Loan, in the case of buying a car.
The lender or the seller has the right of repossessing the goods (pulling back), if the buyer fails to pay the installment within the scheduled time; failure of paying installment on time is called Defaulting in legal term.
How it works?
Usually the Seller or the owner prefers to sell the goods in cash. But due to financial constraints and the risk factors if sell it on credit, the seller can transfer the ownership of the goods to a finance company such as commercial bank. So that the seller can receive cash immediately when the item is sold.
The buyer is able to receive the goods by paying only a certain percentage of the agreed purchase price, with the required contract documentation processes completed.
The Hirer’s (buyer) Right
- To buy the goods at any time by paying the balance of the Hire Purchasing price (usually with some discounts for early settlement).
- Transfer possession of the goods and the obligation of repayment to a third party.
The Hirer’s Obligations
- To pay the installment as stated in the contract
- Take reasonable care of the goods. If damaged, the installment has to be continued until the last scheduled repayment.
- To inform the owner (the seller or the bank) where the goods will be kept.
- Will not sell the goods to a third party, unless the full installment has been settled.
The Owner’s (Seller) Right
- To forfeit the deposit
- To retain the money already paid and recover the unpaid balance.
- To repossess the goods, in the case of defaulting.
- To claim losses or damages suffered, in the case of repossession or matters related to the goods.