Unit+2.2+Types+of+Installment+Trading

=Types of Instalment Trading=

Hire Purchase
Hire Purchase is a system of buying things on credit. Thre parties are involved in a hire purchase, the seller, the buyer and the financier who advances the money to the buyer. The buyer does not own the goods until he pas paid the goods in full.

All parties involved in a hire purchase must sign a hire purchase agreement. The agreement will specifiy the time for repayment, amount to be paid for each instalment and the number of instalments.

The buyer cannot transfer the ownership of the goods to anyone while the goods are still on hire purchase. If the buyer fails to pay the full amount of the goods, he will have to return the goods to the financier or the financier can take possession of the goods.

Hire Purchase is suitable for goods with a good resale value such as machinery or cars, and durables such as computers and expensive electrical appliances.

Deferred Payment.
Sellers are willing to offer the more expensive items to the buyers to take home now and pay for them latr. Deferred payment is actually a credit sale where the buyer gains immediate possession of the goods after he has signed the agreement. If the item bought by the buyer is not too expensive, the seller can allow the buyer to pay in a few instalments. In most cases no interest is charged, but the item is sold at a higher than normal price.

Usually the repayment periods are short because the seller cannot repossess the goods and the resale value of the item is low. If the goods are expensive items, the seller will help to arrange a deferred payment loan for the buyer. This form of trading encourages the consumers to spend unnecessary and cause them to owe debts.

If the buyer fails to pay the full amount of goods, the seller can sue the buyer. The buyer can dispose of the goods even though he has not paid all the instalments. Deferred payment is suitable for goods that have low resale value such as jewellery, customised plant and machinery, clothes or cheap electrical appliances and furniture.