{"id":10317,"date":"2011-08-03T10:18:35","date_gmt":"2011-08-03T09:18:35","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=10317"},"modified":"2019-07-04T10:21:05","modified_gmt":"2019-07-04T09:21:05","slug":"different-types-of-debts","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/different-types-of-debts\/","title":{"rendered":"Different types of debts"},"content":{"rendered":"\n

People sometimes have difficulty in distinguishing between different types of personal debt and lenders can sometimes be less than helpful in explaining these differences. One distinction which is important to understand is whether a personal debt is secured or unsecured. Take for example a situation where you are considering buying a car or some other type of motor vehicle. <\/p>\n\n\n\n\n\n\n\n

There are a wide variety of ways that you can pay for your new or second hand vehicle. If you have the funds available, you can pay wholly in cash. Alternatively you may purchase your vehicle by trading in your old vehicle and paying the balance in cash.<\/p>\n\n\n\n

Another way you can do it is by obtaining an unsecured loan from your\n bank or building society or even from a family friend and purchasing \nthe vehicle using the loan funds only or in some combination with your \nown cash funds supplemented by the trade-in value of your own old \nvehicle. The loans obtained in this way are unsecured and the people who\n loaned you the money have no claim over the goods you bought with it, \nin this case the vehicle. If you obtained the loan from a bank or \nbuilding society or another type of finance company you are likely to \nfind that such an unsecured loan may be described in the loan documents \nas \u2018Credit Agreement Regulated by the Consumer Credit Act 1974\u2019 or \n\u2018Fixed Sum Loan Regulated by the Consumer Credit Act 1974\u2019. Do not be \nfooled. Neither of these is a HP Agreement and if you purchase a vehicle\n using such a loan in whole or in part, the vehicle is now your \nproperty. The lender of the funds has no claim whatsoever over the \nvehicle and cannot repossess it on \u2018security\u2019 grounds.<\/p>\n\n\n\n

\"Vehicle<\/figure>\n\n\n\n

However, you may find when you go to your dealer to purchase your \nvehicle that your dealer suggests that you take out or enter into a Hire\n Purchase Agreement. You need to listen carefully to the words used by \nthe dealer and read carefully any documents provided. If you acquire a \nvehicle under a Hire Purchase Agreement, the vehicle is not your \nproperty \u2013 at least not yet. The words \u2018Hire Purchase Agreement\u2019 simply \nmean that you have entered into an agreement to hire the vehicle with an\n option to purchase. Accordingly you do not have the right to sell on \nsuch a vehicle. Even if you have paid a deposit in cash or otherwise or \ntraded in your own vehicle as part satisfaction of the Hire Purchase \nAgreement, that does not make you the owner of the vehicle.   <\/p>\n\n\n\n

For that reason, when you go to buy a vehicle it is important to \ndistinguish between financing the deal (in whole or in part) using an \nunsecured loan and financing it (again, in whole or in part) by entering\n into a Hire Purchase Agreement \u2013 let\u2019s call it simply HP. The first \nstep is to ask whoever is financing the deal which it is. If you are \nbeing offered HP, you will have an opportunity to examine the contract \ndocuments. Make sure that the documents are entitled \u2018HIRE PURCHASE \nAGREEMENT REGULATED BY THE CONSUMER CREDIT ACT 1974\u2019. An alternative \ntitle used in HP documents is \u2018CONDITIONAL SALE AGREEMENT REGULATED BY \nTHE CONSUMER CREDIT ACT 1974\u2019. These are both acceptable titles for HP.<\/p>\n\n\n\n

If you want to be doubly sure, check the text of the HP agreement. \nThe text of the agreement should include a section entitled TERMINATION:\n YOUR RIGHTS\u2019. This section confirms that you have a right to end the \nagreement and explains how you can and should go about doing so, if that\n is what you want to do.  Furthermore, the text of a valid HP Agreement \nshould also include a section entitled \u2018REPOSSESSION: YOUR RIGHTS\u2019. This\n section explains your rights in the event that the HP provider wishes \nto repossess the vehicle. There are other standard sections in a valid \nHP Agreement and if the agreement in front of you ticks all the boxes \nabove, then it is highly likely that that is what it is. You will not \nbecome the owner of a vehicle acquired under a Hire Purchase Agreement \nuntil you have paid all the installments due under the agreement and \nexercised your \u2018option to purchase\u2019 right at the end of the term of the \nagreement.<\/p>\n\n\n\n

In the event that you enter into an Individual Voluntary Arrangement \nwith your creditors, you will have to continue to pay the full amount of\n the monthly HP premium. As a secured liability, the HP agreement is \nsimilar to a mortgage in that respect. The HP debt cannot be entered \ninto the IVA unless you default on your HP payments. If you do default \non your HP payments, the HP provider can, and probably will, repossess \nthe vehicle (according you your due rights under the agreement). Any \nshortfall that arises would attain \u2018unsecured\u2019 status and be entered \ninto your IVA as an unsecured debt. At that point it would rank for \ndividend equally with all your other unsecured liabilities. <\/p>\n","protected":false},"excerpt":{"rendered":"

People sometimes have difficulty in distinguishing between different types of personal debt and lenders can sometimes be less than helpful in explaining these differences. <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[6],"tags":[],"class_list":["post-10317","post","type-post","status-publish","format-standard","hentry","category-general-debt-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/10317","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=10317"}],"version-history":[{"count":1,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/10317\/revisions"}],"predecessor-version":[{"id":10323,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/10317\/revisions\/10323"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=10317"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=10317"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=10317"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}