Dealing with Arrears on Hire Purchase and Conditional Sale

Hire purchase is a finance agreement under which the purchase value can be paid over an agreed term through instalments. HP is utilised to obtain vehicles or goods.

During the term the goods acquired remain the property of HP provider where the seller has authorized his titles of ownership. Ownership is awarded to the HP receiver using a bailment by the seller. Furthermore, if your payment defaults, the HP lender can repossess the goods.

On the contrary, once the fully paid, the goods can be yours. HP is also recognized as conditional sale. The agreement that you have signed with your HP creditor can use either of this term.

Hire Purchase Arrears – What can happen?

If you have arrears on your HP agreement, your lender is likely to follow up for payments. They can either grant extension of the agreement or let you pay it over a reasonable period.

Failure to comply with the agreed terms will result to a default notice. This can happen if you failed to arrange terms or make payments within 3 months. Once you get the notice of default, court action can be secured to repossess the goods.

If you’re grappling to repay your arrears yet you prefer keeping the HP goods, call us right away.

Repossession of Hire Purchase Goods

If your HP deal in default, your creditor can recover the debt by repossessing the goods. This can happen once your creditor secures legal action against you. This will depends on how much you’ve paid for the HP goods and where it’s being kept.

Significantly, your creditor can take back the goods without any court order under these circumstances:

  • You’ve given less than a third of the sum owed following the HP contract, and
  • The goods are exposed on a public property rather than your home or in private area or land

If you’ve made payments more than a third of what you owed, a court order has to be secured by your creditor to seize the goods. Also, when the goods are kept on your home or private land. This implies that household goods are unlikely to be taken out but vehicles can usually be seized.

Your creditor will sell the goods at an auction when repossessed. The proceeds will be use to pay off your debt. If the proceeds aren’t enough to cover the debt, this could mean you still owe them.

Additionally, if your creditor commences court action, you’ll get some court forms via post. As soon as you get one or as early as now, you might consider getting debt help.

Terminating a Hire Purchase Agreement

If you’re unable to manage to pay your HP, you can terminate the contract yourself at any period. This is possible if you don’t want to kee the goods and you haven’t got any notice of default.

Once you terminate the agreement, payments you’ve made to HP will not be refunded. To end the agreement, you can send a letter by registered mail. You must keep a copy of this letter and the receipt.

The creditor will respond in writing, informing the arrangements on returning the goods. They may collect the goods themselves or tell you to bring the good(s) to a local dealership. If you live far, they can’t oblige you to travel for a long distance.

You might still be paying fees after returning the HP goods. If there is a shortfall, you can attempt to repay it through affordable instalments.

Most importantly, if you know you can’t sustain the payments, it’s much ideal to act quickly and terminate the contract before an arrears mount up.

There are HP agreements aren’t governed by the Consumer Credit Act. These types of contract will not allow stopping these arrangements early. This essentially concerns more traditional high-value agreements or contracts brought out by a business.

HP Balloon Payments – What are they?

Variety of HP vehicle agreements beget a high ‘balloon’ payment at the end period. The balloon payment indicates that the regular monthly instalments will be reduced.

Advantages of a Balloon Payment are as follows:

  • You’ll normally have nothing more to repay when you end it yourself when you’ve paid less than 50% of the agreement. There may be additional costs if the goods are destroyed.
  • The regular payments each month are lower
  • If you can return the goods if you prefer not to keep it rather than paying the balloon payment.

However, should you be interested to keep the goods, you’ll need to pay the balloon payment. If you can’t manage to pay it, your HP lender may let you meet the balloon payment under instalments instead of repossessing the goods.

Can I Sell HP Goods?

HP goods acquired remain the property of HP provider. This suggests that you’re violating the law once you sell it and creditors can take matters to court against you.

Vehicles covered by HP are all registered on a database named the HP Index which is accessible to anyone before they purchase a vehicle.

I need help with hire purchase debt!

We have debt experts that offer free debt advice to individuals with debt-related problems. If you perceive that you’re needing help with your finances, make use of our debt advice tool or call us on 0800 193 1024.