Exiting Hire Purchase Agreement: A Guide for Borrowers
A hire purchase agreement, commonly known as “installment buying,” is a financing option for those who wish to purchase a large ticket item, such as a car or equipment, without paying the full amount up front. The borrower pays a down payment followed by regular, usually monthly, installments until the full amount is paid off. However, there may come a time when a borrower needs to exit the hire purchase agreement before the final payment. This article will provide a guide for borrowers on how to exit a hire purchase agreement.
Review the Terms and Conditions of the Agreement
The first step in exiting a hire purchase agreement is to carefully review the terms and conditions of the agreement. The agreement should outline the borrower`s rights and options to exit the agreement early. This information can typically be found under the “termination” section of the agreement.
Some agreements may allow the borrower to voluntarily terminate the agreement if they have paid a certain percentage of the total amount due. Other agreements may give the borrower the option to sell the item and pay off the remaining balance. Understanding the options available can help the borrower make an informed decision.
Calculate the Total Amount Owed
Before exiting the agreement, the borrower should calculate the total amount owed, including any outstanding balance and fees. Some agreements may have penalties for exiting early, which should also be factored into the total amount owed.
Communicate with the Lender
Once the borrower has reviewed the agreement and calculated the total amount owed, they should communicate with the lender. It is important to inform the lender of the borrower`s intention to exit the agreement and to discuss the options available.
The borrower may need to provide written notice of their intention to exit the agreement and any reasons for doing so. The lender may then provide instructions on how to proceed with the exit process.
Make a Payment Arrangement
After discussing the options with the lender, the borrower should make a payment arrangement to settle the total amount owed. This may involve paying the remaining balance in full or negotiating a new payment plan.
It is important to note that failing to make payment arrangements can result in late fees, legal action, and damage to the borrower`s credit score. Therefore, it is crucial to communicate with the lender and make a payment arrangement as soon as possible.
Exiting a hire purchase agreement can be a complicated process, but with careful planning and communication with the lender, borrowers can successfully exit the agreement. It is important to review the terms and conditions of the agreement, calculate the total amount owed, communicate with the lender, and make a payment arrangement to settle the outstanding balance. By following these steps, borrowers can minimize the potential negative consequences and move forward with their finances.