A loan agreement is something many people rush into signing without examining the terms and conditions of the loan.
It’s probably because they’re only focussed on getting the money into their account, but neglecting the actual loan conditions before they sign the loan agreement can land them in a financial mess.
So before you sign a loan agreement, please remember to look out for these specific things in the loan agreement form.
5 Things In the Loan Agreement Form To Look Out For
1. Loan Amount
Make sure that the amount on the loan agreement form is the actual amount you applied for.
Do not borrow more than you need as not only will it be harder to repay, but you’ll also end up paying more in interest & fees.
2. Loan Installments
It’s very important to confirm that the loan installment amount on the loan agreement form corresponds with what you were quoted.
You also need to be totally comfortable with repaying the amount that you’re signing for as you do not want to get into arrears which could cause loads of trouble for you.
If you default on a loan installment payment, even if you just pay it late, it will negatively affect your credit score.
A good tip is to ensure that the date payable is either on or before your pay date, so that your debit order won’t be declined.
The installment period will also mention how often you will be making the loan repayment amounts which could be weekly or monthly.
3. Service Fees & Initiation Fee
These fees are regulated by the National Credit Regulator (NCR) together with the National Credit Act (NCA) which prohibits lenders from charging more than the amount that is prescribed.
If you have multiple loans, each one will be attracting its own fees which can be consolidated into one loan which would be subject to only one service fee amount, saving you money.
4. Loan Interest Rate
Whilst the maximum interest rate a lender may charge is governed by the NCR, increasing your credit score will ensure you get a lower interest rate.
Also check the interest rate on the loan agreement form and whether it’s linked to your personal credit score or not.
Also confirm whether the interest rate on the loan agreement is calculated on a monthly or annual interest rate, which could mean a massive difference to your installments and total interest payable.
5. Total Cost Of Credit
The total cost of credit is the sum of all your installments, which will include the principal loan amount and all the associated costs as illustrated below.
Total cost of credit = Original loan amount + Interest + Fees + Credit life insurance (over the term of the loan).
This figure may give you a bit of a shock as it will be significantly more than your loan amount, however if you can pay more than the minimal loan installment amount, you’ll be able to pay it off a lot quicker & save money.
Again, ensure that the interest rate and term are correct when examining this amount in your loan agreement.
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