The correct term for a HP agreement nowadays is an “Instalment Sale” but people still use the term HP. HP is similar to the Lay-By system in that a deposit is usually required with the balance then paid for in instalments over a set period of time. The differences are that you take delivery of the goods immediately and you pay interest. Effectively you are “hiring” whilst you are “purchasing”.
There are two types of instalment sale. The first is where an intermediary institution (usually a finance house such as Wesbank or Stannic in the case of a car purchase, or a bank or building society, in the case of property) is used. In this situation, the finance house pays for the item being purchased in full and you then pay off the debt to the finance house. You can take the item immediately and use it whilst you are paying your instalments, but the item only actually becomes your property once the last payment has been made. Until that time it is the property of the finance house.
The second situation is the type of arrangement that many people use to purchase household appliances and furniture and the contract is entered into with the specific store involved. In both cases no card is issued and you usually receive a monthly statement with a remittance advice attached for you to use when you send your instalment (if you don’t arrange to pay by debit order).
The exception to this rule is a Finance Company such as Consumer Credit Corporation (Pty) Ltd or Unibank who are independent credit grantors in that they will assist you with credit for a wide range of goods/services. Although you are issued with a credit card, each separate transaction has to be negotiated and approved. The company has no interest in the item/service you purchase and unlike a Finance House such as Stannic, they will not repossess goods in lieu of payment if you default. They will simply prosecute you.
Applying for HP
In both of the above situations, you would scout around first in order to find the dealership which has the item in the price range you can afford. In situations where Finance Houses are used you can also shop around to see which Finance House will offer you the best terms. Dealerships frequently have staff from the finance house available on their premises in which case you would be referred to them to complete the necessary forms. If a dealership uses more than one Finance House, they may get you to fill in forms with the assistance of the salesperson who is dealing with you at their premises and submit them on your behalf, or they may send you directly to the Finance House to complete them.
Where the agreement is to be directly between yourself and the store, the salesperson will normally assist you to complete the application immediately for their credit department to consider.
In both cases make sure you know exactly what you are signing and insist that the salesperson explains anything that you do not understand. If you are unclear about anything do not sign.
How Long Will It Take?
The filling in of application forms is a tedious process and you may need to take them away with you if you don’t have all the necessary information at hand. To be on the safe side, never bank on a decision being made in less than 48 hours. The salesperson should give you an idea of how long the approval process should take and will usually call you once the deal is approved.
If you do not hear from the finance house/company involved within the time they specified, call the person you dealt with and chase them up. In most cases, there is a commission for the salesperson riding on the sale so it is in their best interests to see that your application is approved. If there has been a problem you may then have to complete additional forms or provide additional security for the companycredit. before they will grant you the
