Though both the system of consumer credit are very popular in financing and look similar, there is clear distinction between the two. In an installment sale, the contract of sale is entered into the goods are delivered and the ownership is transferred to the buyer but the price is paid in specified installments over a period of time.
In hire purchase the hirer can purchase the goods at any time during the term of the agreement and he has the option to return the goods at any time without having to pay rest of the installments. But in installment payment financing there is no such option to the buyer. In installment payment, the ownership of the goods is transferred immediately at the time of entering into the contract. Whereas in hire purchase the ownership is transferred after the payment of last installment or when the hirer exercises his option to buy goods.