Benefit if interest rates fall

A variable rate hire purchase (HP) agreement comprises of fixed repayments of capital together and repayments of interest which is calculated daily against the reducing balance. This is popular when interest rates are expected to fall, or you expect to settle the entire agreement early or pay off lump sums.

The interest is calculated daily at an agreed percentage over the NatWest base rate and is payable and invoiced monthly or quarterly (as per your preference) – payable via a direct debit.

It is also possible to settle the entire agreement early and only pay interest up to the date of settlement, or pay off lump sums and further reduce the overall interest charges. As the interest charged would increase in the event of a rise in the NatWest base rate, customers who expect the rates to go up may wish to consider HP Plus as a fixed-interest alternative with similar lump sum / early settlement benefits. The goods become yours once all capital and interest payments have been made.

Note: HP Variable is not available on regulated credit agreements (i.e. if you are not a limited or public company, limited liability partnership, a partnership with four or more partners, or are borrowing £25,000 or less.

Benefits of HP Variable:

• The goods are yours after the final payment
• Enjoy savings when interest rates fall
• Fixed repayments of capital
• Interest payments may be made monthly or quarterly
• Ability to pay off lump sums
• VAT is usually fully reclaimable
• Interest charges are usually tax allowable
• Tax writing-down allowances may be available including the Annual Investment Allowance or super-deduction

What happens at the end:

• You pay a nominal option-to-purchase fee at the end of the agreement, and ownership transfers to you.

How it compares: