Loans - Things to keep in mind before finalizing your personal loan

Before signing for a personal loan try to get a copy of the agreement or contract. Understanding the important clauses within the agreement can help you avoid a lot of trouble in future. You can get all ambiguities resolved by speaking to the staff of the bank or finance company, in whose favour you shall be drawing the post-dated cheques towards repayment of your personal loan. In case you are uncomfortable with the terms, simply don't take the loan from that lender.

Check the fine print:

Check if there is a pre-payment penalty - if there is one, find out which has the lowest rate Find out whether the interest remains constant through the contract period Read the fine print carefully. Remember, if there is a problem later, what is written is what counts What the marketing person tells you verbally, carries no weight. Sign an agreement/contract that has been filled up by the financier. Signing blank agreements definitely does not work favourably for you.

Read between the lines:

The company will also ask you to sign some documents. You should try to read between the lines and only after carefully understanding the legal implications involved in all the agreements, should you put your signature. Always ask questions in case you need any clarification, especially in matters regarding the legal recourse the company has against you, in case you default on the repayment of even a single installment or in case the cheque issued by you bounces.

Get your documentation in order. No matter who lends you the money, you need to have some basic documents ready

  • Proof of Income
  • Proof of Residence
  • Banking History
  • Proof of Identity
  • Signature verification from the bank
  • Post-Dated-Cheques or Employers' Authority for salary check-off facility
  • Photographs

Fulfill all the formalities:

After you have fulfilled all the formalities to the satisfaction of the company, the company will send the documents along with post-dated cheques to their processing centre. It is good to have PDC's ready on intimation from the bank about approval of the loan. Some banks take 2 to 3 weeks to use PDCs. If the PDCs are ready loan disbursement will be quicker.

Pay installments on time:

Once the loan has been sanctioned to you, make sure you pay the installments on time. This will help you to maintain a good credit relationship with the lender. It will not increase your overall loan cost, rather you will be benefited by a lower cost loan in future. Ask for the interest computation sheet or the loan statement at the end of the year. Verify the interest rate charged.

There is no law or regulation that requires lenders to use a standard format to disclose all their interest charges and fees. That gives lenders the opportunity to play around with the way they sell you the loan! The loan could turn out to be very expensive if you added up the processing charges and the dates on which you have to pay back your installments. Get the lender to give you all the charges, obvious and hidden, in writing, with a statement that there are no other charges. Some lenders may not give you anything in writing. Talk to a few friends and relatives who may have taken a similar loan from the same lender and see what their experience has been.

Source : DWT back

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