Introduction And Meaning Of Installment Purchase
Like hire purchase, installment purchase system is also a financing option in which buyer obtains an asset by making partial payment and agrees to pay remaining amount on installment basis. In this system ownership of good is transferred to the buyer after making the first payment. Buyer can sell or transfer the ownership of the good to the third party at any time and seller cannot seize the item in case of default in payment of installment.
Features Of Installment purchase System
The main characteristics of features of installment system can be pointed out as follows:
1. Parties Involved
As we know that there are three parties (seller, buyer and financing company) are involved in hire purchase system. But in installment purchase, only two parties i.e seller and buyer make an agreement.
2. Use And Ownership Of Asset
Ownership of asset is immediately transferred and item is delivered to the buyer after making the agreement. So, buyer becomes the owner of the good in installment purchase system.
3. Selling Or Transfer Of Assets
Under hire purchase, buyer cannot sell the asset until the last installment is paid, but in installment, buyer can pledge, sell or transfer the ownership of asset at any time because he/she is the real owner.
4. Repair And Maintenance
Buyer is responsible for repairing and maintaining the asset. All the risks should be borne by the purchaser after completing the purchasing agreement.
5. Installment Period And Frequency
Installment period may range from 6 months to 10 years as per the durability and value of the asset. Frequency of installment may be weekly, monthly, quarterly, half yearly or yearly.
Also Read
Features of hire purchase system
Difference Between Hire Purchase And Installment
6. Right To Return
User or buyer has no right to return the item if he/she does not like it.
7. Default In Payment Of Installment Amount
In case of default in payment, vendor cannot seize the item but he/she may file a suit against purchaser.
8. Interest Amount
Amount or rate of interest is included in the amount of installment while making the agreement.
