Before you take a loan (or other financial product) you have the right to receive all the necessary information that will allow you to make an informed financial decision.
If you are taking a loan, you should know the answers to the following questions before agreeing to the loan.
- What is the size of the loan amount you are borrowing?
- What is the loan term? This is how long it is going to take to repay the loan.
- What is the interest rate? This is the percentage of the total loan amount charged for using the loan amount. It is normally charged on a monthly basis.
- What are the fees on this loan? These are normally once-off payments or administrative costs such as a loan processing fee.
- Do I have to take out insurance with this loan? If you take out loan insurance it will pay back your loan if something bad happens to you. This will protect your family and guarantee the bank gets its money back.
- How much is the loan payment? This is the amount of money you have to pay at regular intervals to repay the loan.
- What is the repayment schedule? This is the frequency with which you need to pay. Normally a bank loan is repaid on a monthly basis.
- Do I need collateral? This is a guarantee in the form of assets such as property that the lender can take if you fail to pay the loan.
- What happens if I pay late? If you do not repay on or before the dates agreed, the bank may charge a penalty. It can be that penalties in the form of a fee or increased interest charges are added to your payment for each day you are late.
- What are the consequences of default? If you should stop repaying the loan completely, the bank will take your collateral and will register you with the credit bureau.
Remember, the relationship with your bank is a life time one. The longer the bank knows you, (and the more your bank gets to trust you because you keep your commitments), the easier it becomes to get preferred rates and charges that will provide you with even cheaper credit.