Credit Union Car Loan v Hire Purchase Agreement

Why We Are Better?

When it comes to financing the purchase of a car, many people simply look for the lowest rate on offer and believe it to be the best option. Headline rates may attract the most attention, but as they say the devil is very much in the detail. Many ‘car finance loans’ offered by garages and some banks are actually hire purchase agreements.

The main difference between using a personal loan and a hire purchase agreement to buy a car is that with a personal loan you borrow money, pay for your car, and own it immediately. With a hire purchase agreement, you don’t own the car until you make the final repayment. This means you cannot sell the car if you run into problems making your repayments.

Watch out for the range of additional fees and charges which you may incur as part of a hire purchase agreement. This would include a documentation fee (for setting up the agreement) and completion fee (a fee charged to end the agreement and pass ownership to the car purchaser). If you run into difficulty in meeting the terms of the hire purchase agreement, you may be charged a penalty fee for missed repayments, a rescheduling fee (if you need to change the terms of the agreement) and a higher rate of interest may be charged on any repayments which you missed.

The conditions of some hire purchase agreements result in monthly payments not being evenly spread out and you may pay less in the earlier months of the agreement. This can make your monthly repayments appear more affordable. However, you may have to pay a large final payment (known as a balloon payment) at the end of the term, a payment you may not have budgeted to meet.

Thankfully, a car loan from your local credit union is much more straight forward. Tom Kiely, CEO of Drogheda Credit Union Ltd said “You borrow the money from us, pay for the car and you own the car immediately. You agree a repayment schedule with us. If you run into difficulty, you can talk to us to see if you can come to an agreement on the repayment terms. Should you be in the happy position of being able to repay the loan early, you may do so without any penalty charges.”

Credit Union Loans are better because?

  • You own the car from the outset – unlike Personal Contract Plans or Hire Purchase Agreements
  • You can sell the car on at any time
  • You can borrow for the full amount
  • There are NO hidden fees, admin charges, transaction charges, set up costs or balloon payments
  • The interest you pay on a credit union loan is the full cost of the loan so it is fully transparent
  • Repayments are calculated on your reducing balance, so you pay less interest with each repayment
  • Your credit union loan is insured in the event of your death – subject to terms, conditions and eligibility criteria – at no direct cost to you.
  • You can pay off your loan early, make additional lump sum repayments or increase your regular repayments, without a penalty. Other lenders may charge you extra for paying them back faster!   

So if you’re thinking about your options for financing a car purchase, look no further than Drogheda Credit Union Ltd with branches in Drogheda, Trim, East Meath, Dunleer and Monasterboice.

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