Hire purchase claims can be complicated for policyholders. Not everyone knows the ins and outs of the process involved in settling a hire purchase claim. Understanding this can prevent any delays in one’s hire purchase claims settlement or losses arising from the inability to follow the correct process.
What is hire purchase?
A hire purchase agreement is a credit agreement in which the person purchasing an item (the purchaser) pays an agreed amount in monthly instalments. The purchaser typically takes out a hire purchase agreement with a bank, retailer or other financial institution for high-value assets like a vehicle or a laptop. The purchaser does not own the asset until they have paid up all the instalments in full.
Settling a hire purchase
A hire purchase is deemed as settled only once the purchaser has paid all the instalments in full, or has settled the entire debt in full with the financial institution, through which the asset has been financed.
By way of explanation, let’s take a vehicle that was obtained through a bank.
Once the purchaser has settled their vehicle finance in full, the bank will present him/her with the vehicle’s registration papers, as well as its proxy details. Note that the bank will be listed as the owner and the purchaser as the titleholder, accordingly.
In order for the vehicle to be registered in the purchaser’s name, it needs to be transferred from the bank into the purchaser’s name, as the new owner and titleholder.
The purchaser then has to get the vehicle registered in their name within 21 days. The documentation issued by the bank needs to be submitted to the purchaser’s nearest licensing department or accredited licensing office, in order for the vehicle to be registered in their name.
It is the responsibility of the purchaser to ensure that the vehicle which they have paid for in full, is registered in their name. If something had to go wrong, such as an accident, hi-jacking or vehicle theft, and the vehicle is still in the bank’s name, the insurer will not be able to pay out a claim.