When handed loan papers, the fact that you’ve successfully gotten the long-awaited money may overwhelm you. This may lead to the rushed signing of contracts without clearly reading the terms, leading to later regrets. To be safe, always double-check your loan contract before signing; you rather spend some hundred on a lawyer who will help you understand the terms better than end up signing terms that will screw you up for the entire payment period. The most basic reason you need to double-check your loan contract is to avoid unfair terms. It also keeps you safe from fraudsters in case you are doing it online. Check and read every printed page to avoid skipping any details. Confirm with the assisting officer if all the pages are intact, and most importantly, check for any red flags. A crucial step you can take when it comes to loans is to ensure that you take your loan from a reputable lender. You can use online reviews to check the consumer rating of your lender. Lenders with a positive consumer rating are reputable, and from such, you can expect loan contracts with favorable terms. The following are vital things you need to understand before signing a loan contract;
- The loan amount
If you apply for a loan, check if the amount you are about to receive is correct. If the amount is more or less than what you applied for, ask for clarification from the bank. These reasons must be clear. If you find aspects that you don’t understand even after clarification, reject such an offer.
- Annual Percentage Rate (APR)
When getting a loan, you should always ask your lender to let you know the loan’s annual percentage rate and indicate it clearly, in the loan contract you are signing. The contract should also state the amount you should pay at the end of the loan life.
- Life of the loan
The life of the loan is the repayment period. It should indicate the amount of time you are required to pay the loan. It should indicate the date for your first payment till that of the last payments. Knowing the life of the loan is essential. It helps you know whether the loan is affordable and lets you plan to pay the loan.
- Cost of the loan
Always cross-check this. The cost of the loan is the total cost of your loan after repayment. It should be what you get after you add the interest rate and your repayment period.
Are there any penalties imposed if you fail to submit your payments on time? Also, check if your lender reduces your interest rate if you are paying off your loan earlier. This will help you decide how you will submit your monthly payments. Some other penalties to look out for include fees for breaching the loan agreement. Understand any actions that your lender terms as “Breach of agreement.”
- Define terms
Always first lookout for the definition of terms section while signing your loan contracts. What does default entail according to your lender? Do they consider it as defaulting if you fail to submit even a single payment? Understand such facts to know how to handle the different circumstances that may arise during the loan repayment.
- Type of interest rate
To be safe, check the type of interest rate that your lender is charging. Is it a fixed or variable interest rate? If it is a fixed rate, make sure it is correct as per your agreement. If it is a variable interest rate, check if the date it is supposed to be charged is indicated and accurate.
In conclusion, cross-checking your loan contract is always a safety measure. In the cross-checking process, ask as many questions as possible and ensure everything is clear to detail. A good lender will always indicate all terms, including any cost and incidentals in the contract. They ought to also give you sufficient time to read and understand the contract before making an appropriate decision. To understand even the legal aspects, have your own personal lawyer take you through the contract. By having a thorough look at your loan contract terms, you always stand the chance of enjoying favorable loan terms
With this article, first-time loan applicants will get some important information to help them on the loan application process. It is imperative to ensure you are acquainted with all the aspects discussed above before signing a loan contract