Hire purchase debt is on the increase, with struggling families opting to “buy now, pay later” in order to ride out the effects of the credit crunch.
According to research by the Finance and Leasing Association (FLA), the amount of money borrowed through hire purchase agreements soared to £231million in March, an increase of 24% compared with 2008. With the increase in hire purchase debt comes a stark warning; families must ensure that they can afford the hire purchase debt repayments.
More retailers are offering 0% finance and ‘pay later’ deals in order to attract new business at a time when shoppers are trying to tighten their purse strings. Due to the current housing market, more people are choosing to stay in their current home rather than move, and are therefore looking for ways to spruce up their home, and might look to take advantage of store credit so they can repay the hire purchase debt over a few months or years, instead of making an upfront payment.
However, as you should before signing any type of financial deal, you should always check the terms and conditions of the hire purchase debt. You could be hit with sky-high interest and charges if you cannot afford to pay for the item, such as if you were made redundant.
Geraldine Kilkelly, of the FLA, said:”Retailers and lenders have been offering attractive interest-free credit and deferred payment deals on store instalment credit…. We would always advise anyone considering instalment credit to be sure that they understand the contract and are confident that they can make the repayments.”