RATESETTER has announced plans to start offering Hire-Purchase (HP) products for commercial and individual borrowers later this month.
While details on the interest rates and underwriting criteria are yet to be released, the company has confirmed that the HP loans will pay into its Provision Fund, just like every other loan on its platform.
The loans will be financed from RateSetter’s existing investment markets, so all new and existing lenders can take advantage of the hire purchase agreements.
“The legal ownership of the underlying asset in each HP agreement will be held by RateSetter on behalf of lenders until the borrower makes their final payment,” explained a RateSetter spokesperson.
“Capital and interest will be returned to RateSetter’s investors each month in the usual manner as the borrowers makes their regular payments.”
Hire-purchase loans are typically taken out by businesses seeking to buy factory equipment, large-scale construction materials, or vehicles.
A down payment is made on the product, and the rest of the value is paid off in instalments, along with a pre-arranged interest fee.
The borrower may return the asset and end the agreement or take ownership of the asset when the final payment is made. This means that the HP loans are secured, as the lender can repossess the asset if a borrower defaults.
“As with all RateSetter loans, HP loans will pay into the Provision Fund,” the spokesperson added. “If a HP loan defaults, the Provision Fund will act as a buffer for lenders and it will then make recoveries using the asset the loan is secured against.
“Please note that the fact that HP loans are secured against assets does not change the way the Provision Fund works in relation to these loans and we always like to be clear that the Provision Fund does not provide a guarantee of safety.”
The loans will be available to both businesses and consumers once they have been officially launched later in July.