Initiation with Hire Purchase

By Indrachapa Sandipani Jayasundera

Hire purchase is a financial service which was introduced as a solution for businesses and individuals to purchase expensive goods and products on credit without the luxury of completing the full payment at once. Instead, customers are able to make an initial down payment and pay the rest as instalments with an interest. In completion of all the payments, the ownership of the product/goods is passed onto the customer permanently.

Hire purchase takes place in the witness of an agreement called the ‘Hire Purchase Agreement’ which is signed to display agreement towards the process of higher purchase from both the parties which is similar to rent-to-own agreement. The hire purchase agreement was developed in the United Kingdom in the 19th century as a solution to allow customers who suffer from the deprivation of cash to purchase goods which are high at cost which at usual circumstances would have to be delayed or declined. It provided the poor the ability to gain access to goods which were once only available to the rich.

Hire purchase is a smart solution which benefits consumers with poor credit. It enables the ability to obtain ownership of products and goods by distributing the overall cost of the product within a set amount of time and therefore reducing the burden of the enhanced price which otherwise the customer would not be able to afford.

Hire purchase is also known as instalment plan in the United States. They are commonly used for items such as vehicles (ex: cars etc.,) and electrical goods (ex: electric iron’s, ovens, microwaves, refrigerators etc.,) which the purchasers are unable to pay for the goods directly.

Along its journey with microfinance, PCCL has begun higher purchase as another resolution to alleviate the poverty stricken local community.

Higher purchase is provided for three wheelers and small scale motor cycles to make life much easier for them. PCCL’s option with higher purchase enables them to purchase vehicles at an easy methodological manner and transport at the ease of their own vehicles. It can be perceived as another important step towards the alleviation from poverty and financial independence.