Non banking financial intermediaries
Functions of hire purchase finance companies ire purchase (abbreviated HP, colloquially sometimes never-never[1]) is the legal term for a contract, in which persons usually agree to pay for goods in parts or a percentage at a time. It was developed in the United Kingdom and can now be found in Australia, China, India, Jamaica, Japan, Malaysia, New Zealand, and South Africa. It is also called closed-end leasing. In cases where a buyer cannot afford to pay the asked price for an item of property as a lump sum but can afford to pay a percentage as a deposit, a hire-purchase contract allows the buyer to hire the goods for a monthly rent. When a sum equal to the original full price plus interest has been paid in equal installments, the buyer may then exercise an option to buy the goods at a predetermined price (usually a nominal sum) or return the goods to the owner. In Canada and the United States, a hire purchase is termed an installment plan; other analogous practices are described as closed-end leasing or rent to own.
If the buyer defaults in paying the installments, the owner may repossess the goods, a vendor protection not available with unsecured-consumer-credit systems. HP is frequently advantageous to consumers because it spreads the cost of expensive items over an extended time period. Business consumers may find the different balance sheet and taxation treatment of hire-purchased goods beneficial to their taxable income. The need for HP is reduced when consumers have collateral or other forms of credit readily available. 1.3 Meaning and Concept of Hire-purchase system |

Hire-puchase system is a special system of purchase and sale of goods. Under this system purchaser pays the price of the goods in instalments. The instalments may be annual, six monthly, quarterly, monthly fortnightly etc. Under this system the goods are delivered to the purchaser at the time of agreement before the payment of instalments but the title on the goods is transferred after the payment of all instalments as per the hire-purchase agreement. The special feature of a hire-purchase transaction is that the payment of every instalment is treated as the payment of hire charges by the purchaser to the hire vendor till the payment of the last instalment.. After the payment of the last instalment, the amount of various instalments paid is appropriated towards the payment of the price of the goods sold and the ownership or the goods is transferred to the purchaser. Thus hire-purchase means a transaction where the goods are sold by vendor to the purchaser under the following conditions : * the goods will be delivered to the purchaser at the time of agreement. * the purchaser has a right to use the goods delivered. * the price of the goods will be paid in instalments. * every instalment will be treated to be the hire charges of the goods which is being used by the purchaser. * if all instalments are paid as per the terms of agreement , the title of the goods is transferred by vendor to the purchaser. * if there is a default in the payment of any of the instalments, the vendor will take away the goods from the possession of the purchaser without refunding him any amount received earlier in the form of various instalments.

| 1.4 Characteristics of Hire-purchase system |

Before discussing the characteristics of hire-purchase system, we must know what is a hire purchase agreement and what are the contents of a hire-purchase agreement. Hire-purchase agreement means a contract between the hire vendor and the hire purchaser regarding the sale of goods under certain conditions. Usually every hire-purchase agreement shall contain the following terms: * the cash price of the goods, cash price means the price at which goods may be purchased against cash payment. * the hire-purchase price, hire purchase price means the total amount which is payable by the hire-purchaser under the agreement. * the date on which the hire-purchase agreement will commence. * the description of the goods that will be delivered to the hire-purchaser at the commencement of the agreement. * the number of instalments to be paid by the hire-purchaser along with the amount of each instalment and the date of payment of each instalment. * the down payment if any, the down payment means the amount which is required to be paid by hire-purchaser to the hire vendor at the time of commencement of hire-purchase agreement. * the rate interest charged by the hire vendor (optional).
Characteristics of Hire-Purchase System
The characteristics of hire-purchase system are as under * Hire-purchase is a credit purchase. * The price under hire-purchase system is paid in instalments. * The goods are delivered in the possession of the purchaser at the time of commencement of the agreement. * Hire vendor continues to be the owner of the goods till the payment of last instalment. * The hire-purchaser has a right to use the goods as a bailer. * The hire-purchaser has a right to terminate the agreement at any time in the capacity of a hirer. * The hire-purchaser becomes the owner of the goods after the payment of all instalments as per the agreement. * Features of Hire Purchase * Hire purchase is an option for those buyers who cannot pay the whole amount of his or her purchase. Hire purchase refers to an agreement where the buyer of a good can take goods on a monthly rental basis and once the rent equals original price of a good in addition to the interest then the buyer may exercise his or her option to buy the goods at a predetermined price or return the goods to the owner. Given below are some of the features of hire purchase - * 1. The person who has hire the goods will give regular installment or rent to the owner of the good which will include some portion of principal amount and some portion of interest as agreed by both the parties. * 2. The ownership of good passes only when the person has paid the last installment of the goods which he or she has hired. * 3. Under hire purchase system the buyer can return the goods to the seller if he or she does not want to continue with the agreement. * 4. In case of hire purchase the person who has taken the good on hire cannot transfer the goods to a third party as he or she does not have the ownership of the goods. * Ownership rests with the seller until all the installments have been paid. It is an arrangement between seller and buyer of goods, normally consumer appliances, wherein the buyer agrees to pay the price over a period of time, in agreed installments, along with finance cost. *
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