Hire purchase, higher price?

As well as any interest charged, often there will be additional costs like establishment and account fees. Some retailers also require you to pay a repayment insurance premium.

So how do you make sure you’re getting a good deal?

The Retirement Commission’s website www.sorted.org.nz has helpful information on hire purchase and credit sale agreements, including these 8 rules for getting your HP sorted:

1. Always ask the retailer to tell you all the fees and charges you must pay.

2. If the deal offers 0% interest, ask what the interest rate will be on balances left at the end of the interest free period.

3. Ask for a copy of the ‘disclosure statement’ detailing all the terms of the credit deal and read it carefully before you agree to the deal. By law you must be given this statement before you sign or within five working days of signing.

4. Compare the charges and fees with the price of what you are buying. It may be that the charges amount to more than the interest you would pay on a different sort of loan or your credit card.

5. Work out the total interest you will pay on your purchase with the Get into Debt calculator on www.sorted.org.nz

6. Only commit to a 0% interest hire purchase or credit sales agreement if you are sure you can repay most, if not all, of the debt in the interest free period. That way you will avoid high interest rates on unpaid balances.

7. Avoid taking on several hire purchase or finance deals at once. It can be difficult to keep track of when each deal has to be paid off and it can be hard to find the money to service many debts running at the same time.

8. Take your time to decide. While, by law, you have three working days after you receive a disclosure statement to change your mind and withdraw from the hire purchase or finance deal, you will still have to find a way to pay for the purchases you made.

Remember – getting into debt is easy, getting out of it is much harder.

To find out more about managing debt, visit the Retirement Commission’s free and independent website www.sorted.org.nz. Sorted is packed with information, tools and calculators to help you manage your money.