When Can a Consumer Settle a Hire Purchase Agreement?
A hire purchase agreement is a popular method of financing when purchasing goods in which the consumer pays for an item over a period of time with interest. It is commonly used for expensive items such as vehicles, appliances, and furniture. However, sometimes consumers may want to settle a hire purchase agreement early. Here are the things you need to know when considering paying off your hire purchase agreement early.
Understanding Hire Purchase Agreement
A hire purchase agreement is a type of agreement in which the consumer agrees to make regular payments to the seller over a period of time. Once the last payment is made, the consumer will own the item. The consumer has the right to settle the agreement early by paying the remaining balance of the debt, including interest.
When Can a Consumer Settle a Hire Purchase Agreement?
The Consumer Credit Act 1974 gives the consumer the right to settle their hire purchase agreement at any time. The Act states that the consumer can terminate the agreement by giving written notice to the finance company. The finance company will then provide the consumer with a settlement figure, which is the amount needed to settle the agreement early. The settlement figure includes the outstanding balance of the debt and any interest or charges that may apply.
The finance company must provide the settlement figure within seven days of receiving the consumer`s written notice. Once the settlement figure has been provided, the consumer has 28 days to make the payment. If the consumer fails to make the payment within 28 days, the finance company may charge additional interest and fees.
Benefits of Settling a Hire Purchase Agreement Early
There are several benefits to settling a hire purchase agreement early:
1. Save Money: Paying off your hire purchase agreement early can help you save money on interest and charges.
2. Increase Your Credit Score: Settling the agreement early can help improve your credit score as it shows that you are a responsible borrower.
3. Own the Item: Once the agreement is settled, you will own the item outright, giving you the freedom to sell or keep it as you wish.
Conclusion
In summary, customers have the right to settle their hire purchase agreement at any time. Settling the agreement early can help save money, improve your credit score, and give you more freedom with your purchased item. However, it is important to remember that settling the agreement early may incur extra fees and interest charges, so it is important to check with the finance company to ensure you fully understand the financial implications before making a decision.
