- Financial Accounting
- Accounting for Installment Sales
- Protection of Seller's Interest in Installment Sales
In installment sales, the seller keeps the title of the asset with itself and the buyers get the possession of the assets. But, in order to protect its interest, seller need to do something sufficient to reduce the chances of defaults in payments from the customer. In order to protect its interest, seller can use following options:
- the title of the asset is transferred to the buyer after the payment of the last installment but it is subject to the lien on the unpaid balance amount,
- the title of the asset is transferred to the buyer upon receiving a mortgage item in return,
- the title of the asset is retained with the seller until and unless, full amount is paid,
- the asset is leased to the buyer till the final payment. This option is also called Hire Purchase.
- the title of the asset is vested to the 3rd party, usually to the bank as they are trustworthy until the full payment is received.