Conditional Sales Contracts

Hi,
A conditional sales contract is the financial instrument that is used to facilitate the purchase of such items as household furnishings, electronics, musical instruments, etc., Before the evolution of the credit card, conditional sales contracts were very common. The contracts were generally set up with finance companies who carried the contract for the retailer. The basic set up for a conditional sales contract is that whatever is purchased is used as collateral for the loan and can be repossessed if payments are not made. The interest rates charged on these contracts are generally exorbitant and the default rate on the loans is usually very high. The finance companies will use conditional sales contacts as a selling tool to offer additional loans reducing the interest rate, while rolling the conditional sales contract into the new loans. Often times, the borrower is not even aware that he or she is dealing with a finance company as he or she is under the impression that the contract is being carried by the retailer that sold them the merchandise. It is sometimes necessary for people to utilize this method of financing due to their credit situation. As with all financing agreements, conditional sales contracts have their place in the market. If you are exploring a conditional sales contract, make sure that you inquire about the interest rates, and who will be handling your contract before you sign.
Next week I will talk about credit and collections. Have a good weekend!
Until then,
Alan