How Early Settlement Works in Hire Purchase Agreements

"Paying off your car finance early can be a smart move. For many drivers, it's a way to save money on interest and take full ownership of their vehicle sooner. If you're on a hire purchase plan, settling up ahead of schedule could lower the total cost of borrowing, but it is not always as simple as just paying the balance."

"The settlement figure isn't simply the remaining balance of your monthly payments. Lenders often work it out so that interest is spread unevenly over the term, meaning more is paid at the start of the agreement and less towards the end. This can make early settlement slightly more expensive than you might expect. Even so, it can still save you money overall if you are only partway through your contract."

Paying off car finance early often saves money on interest and results in full vehicle ownership sooner. Early settlement of a hire purchase contract involves paying the remaining amount in full before the agreed term ends. Lenders require a settlement figure that may include remaining interest and any applicable charges or early repayment fees. Interest is often front-loaded across HP agreements, meaning more interest is paid in early months and less later, which can make early settlement cost slightly higher than expected. Legal rights under the Consumer Credit Act 1974 include the right to settle an agreement early and to receive a clear settlement figure when requested.

Read at Business Matters