Hire purchase agreements are often a source of financial stress when things get tight. That’s why it is very important to consider whether you really need what you’re buying on hire purchase, or if there’s another way of paying for it, such as a personal loan or credit card.

However, there are often a lot of deals to be had with hire purchase, so if you do decide to go into one, make sure you have all the information available.

With interest-free periods, make sure you can pay the entire cost of the purchase within the period – this will usually mean paying more than the minimum repayment. And be sure to know what the interest rate will be after that period – if you can’t pay the whole cost, you will be charged interest on the remaining balance.

The seller must provide you with a Disclosure Statement, which needs to have all the information about the costs of the hire purchase agreement.

• How much repayments will be
• Interest charges – how much they are, and how they are calculated
• All fees and charges, including insurance and credit check charges
• What happens if you default on payments
• If there are any early repayment fees. This is particularly important to check for on interest-free loans – are you going to get stung for paying off what you owe within the interest free period?

The disclosure statement should clearly state the total cost of the loan – what you will pay inclusive of fees and interest.

If you suffer “unforeseen hardship” – such as illness, injury, or redundancy – you can apply to change the terms of the contract. You might be able to extend the time you have to pay off the remaining balance, or postpone payments without changing the interest rate.

But it’s very important that you act early – the seller doesn’t have to consider your application if you are already two months behind on payments, or if you’ve been late with your payments four times in a row.