Thursday, August 27, 2009

How To Engage In Hire Purchase

Hire Purchase (HP)?
Hire Purchase usually happen in car loan. When you buy a car, you are the hirer and the bank is the financier. Then, you have the possession of the car but at the same time have to repay the bank who is the owner of the car based on the terms of payment . When the instalment paid up, the car owner is you.

Governing Legislation
You were protected by Hire Purchase Act 1967. Refer to it when necessary.

Major banking institutions. You will receive a financial statement called Second Schedule Part 1, which state your financial obligations under the proposed HP agreement.
However, sometimes the car dealer will help you to obtain loan. You will receive Second Schedule Part 2 states that the bank is a party to the agreement. Remember you don't need to pay anything for Second Schedule, and lawyer is a white elephant in HP agreement.

Minimum Deposit
10% of the motor vehicle cash price is the minimum deposit should be required by banking institutions. However, we had heard alot of RM1 deposit or zero deposit nowadays.

If you default, the guarantor is liable for the unpaid portion of the HP financing and interest due. A guarantor is pre-requisite.

The car dealers or the banking institutions will arrange insurance cover for you in the first year. For the subsequent year, you will need to find for insurance yourself. Motor vehicles under HP financing usually need a comprehensive insurance policy.

Fixed rate or Variable rate financing?
Fixed rate financing means that the interest charge is fixed. Maximum rate charge in fixed rate term capped at 10% per annum. The variable rate financing follow the movement of the base lending rate (BLR). Maximum variable rate financing interest capped at 17% per annum. Your prediction of future interest rate movement is crucial in selecting type of financing.

Generally, the banking institutions have the rights to repossess the registered vehicle if you unable to pay for instalment for 2 months consecutively.

If you have further question. visit here.

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