Due to the urgent need for quick cash, most borrowers of installment loans fail to read the loan agreement diligently. Most lenders, however, do not thoroughly explain the contents of their loan agreements either. So, it is important for borrowers to take time and read all the fine prints on their loan agreement before signing in order to avoid future complications.
Reading the very specific details on your loan agreement will not only protect you from some predatory practices of lenders, but will also help you know your rights as a borrower and consumer of installment loans. As a consumer, you need to know every single valuable information and term within your loan agreement. Here are some provisions on your loan agreement that you need to be aware of:
- Contact Information of the Lender
The lender’s contact information should be stated clearly in your loan agreement. This should include the lender’s company name, address, phone or fax number, and an email address. This information is important in case of inquiries and assistance.
- List of Interest Rates and Other Fees
Your loan agreement with your lender should include a list of interest rates and other fees. This must be stated clearly and completely. It is even more preferable if you let your lender explain these terms to you. Find the APR, and let your lender calculate the exact amount you need to pay per month for your installment loan. Also, let your lender discuss the fees for late payments or bounced checks and what options they can offer to avoid this.
- Payment Obligations
The repayment schedule and extensions must be clearly explained in the loan agreement. Ask your lender if there are additional fees for payment extensions and other options they can offer in case of payment defaults. Look also for the statement: “You cannot be prosecuted in criminal court for collection of this loan.” This statement is important because it means that you can’t be arrested for not paying your loan or end up in civil court.
In most contract or loan agreements with installment loan lenders, not all of the terms and conditions are clearly stated and emphasized. These hidden terms will only be revealed after the borrower has signed the loan agreement and later when they are asked to pay for a fee that they were not aware of before. With this, different regulatory laws are implemented to keep these lenders from abusing their consumers. Now, lenders are required to include a disclosure box stating clearly all the terms and conditions in a loan agreement.
Nevertheless, it is still in the hands of the consumer to prevent lenders from preying on their financial woes. Before taking out an installment loan, you need to examine your loan agreement carefully to protect yourself against these untrustworthy lenders. You need to know the legal and illegal terms included in your loan agreement. Here are some illegal stipulations that you need to watch for before signing an agreement with your installment loan lender:
- Annual Interest Rates
Different states have different provisions of how much lenders can charge on interest rates for installment loans and other short-term cash loans. However, most states cap on interest rates does not exceed 30% annually.
- Membership Fees
Some lenders charge a one-time membership fee, usually about $10 to $15 to first time borrowers. Before paying, check first with your state laws to see if this fee is allowed and legal.
- Service Fees
Although service fees are permitted by law in most states, there is a maximum limit that lenders must follow. If the lender charged you more than the limit stipulated in the law, you can take legal action. Service fees are charged for loan processing, verification, handling, and origination.
- Rollover, Renewal, or Extension Fees
Before getting an installment loan, it is important to know your state laws regarding the maximum number of rollovers, renewals, or extensions your lender is allowed to give you. Beware of lenders who have rolled over or renewed you loan several times more than the maximum legal amount.
If your loan agreement does not contain or state clearly the necessary information or may contain illegal entities in violation of the stipulated laws regarding responsible lending, you’re better not sign the loan. You can shop for other lenders or loan companies that will offer you better terms and trustworthy contracts.