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The money doctor: How to avoid having your hire-purchase car repossessed

IF you have a hire-purchase agreement and want to end the contract and keep the car, you must generally pay the full hire-purchase price (the cost of the car plus interest and any other costs). You may get some discount on the amount of interest you have to pay if you are ending the agreement early -- but this does not necessarily relate to personal loans.

If you find it difficult to keep up with your payments, contact the bank or finance company as soon as you can. They will often agree to change your agreement to make it easier. However, they may be entitled to charge you a rescheduling fee. You will have to pay extra interest to cover the extended period for repayment. The amount of the installment you pay each week or each month may be lower, but it will take you longer to own the car. But this will help your cash flow -- remember income is your number-one asset.

Even with these extra costs, changing your agreement will usually cost you less than having the car repossessed. Changing your agreement also means you can continue to use the car.

You can end a hire-purchase agreement at any time. However, you must:

give notice in writing and return the car; pay half the hire-purchase price, less the total of your payments to date (including any deposit you paid).

This is sometimes called the 'half rule'; pay the cost of any repairs needed if you have not taken reasonable care of the car.

Under a hire-purchase agreement, you have a duty to take reasonable care of the car. You can usually expect to receive a bill for repairs if the car is damaged when you return it. You could consider getting a mechanic to check the car and pay for any necessary repairs before you return it.

You should contact your lender and tell them that you want to end the hire purchase agreement under the "Half Rule". Once you have paid half the hire-purchase price, they must accept this decision. Make sure you do not sign a voluntary surrender form when you leave the car or you will have to pay the balance on the hire purchase agreement. If you sign a 'voluntary surrender form', you give up your right to end the agreement under the half rule.

When you have a hire-purchase agreement, most lenders send details of the repayments you make to a credit-reference agency, the Irish Credit Bureau (ICB). This information builds up your credit record (or history). The ICB keeps details for five years after the agreement ends.

You can get a copy of your credit record from the ICB for a small fee. You cannot get information about your credit history over the phone, as credit-reference agencies must keep your information confidential.

If you end a hire-purchase agreement early, give back the car and pay what you owe, your credit record will not be affected. The agreement will be shown as completed. Drive carefully!