StepChange Debt Charity often get questions about what is the best way...
HP or a credit agreement – that is the question!
Have you bought a sofa from DFS, a TV from Curry’s, maybe a bed from Bright House or a car from your local dealers?
Are you worried that you can’t make payments and they are going to take your goods away? Or do you think that you don’t have to make payments and that your goods are safe?
So what’s the difference between hire purchase and a credit agreement?
- If the item is on hire purchase and you fail to make payments the item can then be repossessed. If it’s a credit agreement it cannot be repossessed unless it’s stated in the terms and conditions of the agreement itself.
- Hire purchase items are not owned by the consumer (you) until paid in full, but for credit agreement items you will legally own the goods as soon as the credit sale agreement is made, even if you have paid nothing at all.
- Credit agreements are regulated by the Consumer Credit Act 1974, and hire purchase agreements are regulated by the Hire Purchase Act 1967.
- You cannot sell or give away hire purchase items while money is still owed. If they have been sold or given away this can lead to potential enforcement action and the goods being recovered to whomever they were sold. If the goods were bought on a credit agreement the items can be sold or given away, because legally you own them.
Always check the agreement you signed as this is the only way you will ever know if the agreement is hire purchase or a credit agreement.
When you complete a budget any hire purchase items will be classed as a priority and should always go on your budget not your debts. If you have a number of hire purchase items and they are not essential you may be asked to consider handing them back, at least until your financial situation is more stable.
So my question to you is: hire purchase or a credit agreement?