Consumer credit contracts - buying on credit 

The finance agreement you make when you buy on credit is covered by the Credit Contracts and Consumer Finance Act (CCCFA). For general information about credit contracts visit our Consumer credit contracts - general information page.

What’s the difference between hire purchase and layby?

Buying on hire purchase (also known as a credit sale) is a form of consumer credit – loans and purchases made with a credit card or finance card are other forms of credit contract. This means that you get the goods straight away, but you still owe money on them, and there can often be interest or other charges and fees.

Read more about consumer credit contracts.

When you buy on layby, the goods are kept at the shop while you pay for them in instalments. No interest or fees are charged, and you can’t take the goods home until you have finished paying it off - so it’s not a credit contract. You can read our Layby page for more information about purchasing this way.

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I tried to buy a new refrigerator on credit, but my application was declined. Can they do that?

Yes. It’s quite likely that the trader or their finance provider requested a credit check on you, because they want to be sure that you’ll be able to make your repayments. If your credit record is unfavourable they are entitled to turn down your application for credit. You can find out more about credit checks and how they affect your ability to get credit, on our Credit Checks and Records page.

Otherwise, they may have turned down your application if you have no regular income or are under 18, and do not have someone to act as guarantor.

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My hire purchase agreement includes insurance – do I have to pay for this too or is it optional?

You can be required to pay for insurance as part of your credit contract, for example:

  • payment protection insurance so that your payments can still be made if you lose your job (for example)
  • gap insurance (if the goods are destroyed and your other insurance does not fully cover your debt, this insurance covers the balance)
  • extended warranties

The trader or lender is not allowed to force you to take out insurance that you cannot use or that duplicates insurance you already have. For example, if you are not employed then they can’t require you to take out redundancy insurance; if the extended warranty does not offer more protection than the manufacturer’s warranty, they can’t make you pay for it.

For consumer credit contracts entered into from 6 June 2015, the lender must make reasonable inquiries before the contract is signed, to ensure that the insurance will meet with your requirements and that you will be able to make the insurance payments without suffering substantial hardship.

If you go ahead with paying for the insurance as part of your credit agreement, the trader or lender must give you a copy of the policy before the credit related insurance is arranged.

You can read more about insurance and credit contracts on the Consumer Protection website.

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Can I cancel a hire purchase agreement?

Once you have received a copy of the disclosure documents you can cancel a consumer credit contract during the cooling off period – usually five working days.
You can also cancel the contract (at any time) if you don’t receive the documents at all, or if they are incomplete.

Note that cancelling a credit contract is not the same as cancelling the contract to buy the goods – if you are already in possession of the purchased goods when you cancel the credit contract you will have to pay for those goods in full within 15 working days.

More about cancelling a credit contract is on our Consumer credit contracts – general information page.