WHAT YOU MUST KNOW ABOUT HIRE PURCHASE FINANCING

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The required documents to support your hire purchase financing agreement are your latest income documents, bank statements, identification card, vehicle driving license, and others. Once you have submitted your documents, you application should be reviewed within 1 week. If your application has been approved, it is very important to know certain elements as listed below before accepting the hire purchase financing offer.

1.The type of vehicle that I am purchasing

There are three types of vehicles in which you can apply for hire
purchase financing:

1) New vehicles
2) Used / pre-owned vehicles
3) Reconditioned vehicles

2. Is a Guarantor required to support my loan application?

Some hire purchase financing cases requires the support of a Guarantor. This may be because the applicant does not have strong credit record. For example, the applicant may be a first time car buyer (without any credit history record), the applicant may be too young for an expensive car with a high loan installment, the applicant may have very high credit exposure, and others. Thus the guarantor will be responsible for paying off the unpaid fees and charges should there be a default on the loan payment.

3. The initial Deposit

Usually, you need to pay a minimum deposit of 10% or more of the total cash value of your vehicle beforehand. Nevertheless, some banks may demand a higher deposit amount depending on the type of vehicle and market value for the vehicle. As for 2 door vehicles, banks will usually finance less than 90%. Normally up to 85% only.

4. Margin of Finance

In a hire purchase agreement, the conventional margin of hire purchase financing is up to 90% of your vehicle value.

5. Interest rate

The interest rates on your hire purchase agreement are divided into two categories – fixed or variable. Fixed or flat interest rate loans are more certain and consistent with a fixed installment amount. While for variable interest rate, the rates can fluctuate and change in accordance with the lender’s base lending rate (BLR).

6. Insurance

As a hirer, you will be required to insure and renew your car yearly as stated in your hire purchase agreement. Prior to approving your loan, you will usually be required to take out a comprehensive insurance coverage on your vehicle. (Please try our car insurance calculator to see how much you will need to pay for your car’s insurance)

7. Late Payment Charges

In hire purchase financing, you’ll be imposed a penalty fee and additional daily interest should you fail to make on-time payments.

8. Repossession

On the other hand, your car will be repossessed by the bank if you default on the monthly instalments as initially agreed by both parties in the hire purchase financing agreement.

Read More: http://MyFinance.com.my/articles/detail/9111401410

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