A personal loan comes to your rescue when you are in immediate need of funds. Many personal loan companies in India offer swift loan approvals and disbursal. However, still, you need a little time to make sure things are all correct before you sign the dotted line. This dotted line is what you need to read carefully.
We are talking about the personal loan agreement. Personal loans in India are now readily available. However, before you avail a personal loan, it is mandatory that you go through your personal loan agreement carefully. Here is the personal loan agreement guide that you need.
What is a Personal Loan Agreement?
A personal loan agreement is a written contract with rules and clauses regarding your personal loan. The lender formulates the agreement. When you sign on the agreement, you agree to the lender’s terms and conditions pertaining to your loan. The loan agreement includes all the details such as the approved loan amount, how much interest rate will be charged, when the EMIs will start along with many other different clauses.
What are all things included in a Personal Loan Agreement?
The clauses of the personal loan agreement vary from one lender to another. It is essential that you read this clause before you agree to them.
Documents and Personal Information Submitted
Here the borrower agrees that the information provided and the required documents submitted are genuine and can be relied upon by the bank or NBFC.
The lender has all the rights to decide the eligibility criteria. This is as per the lender’s guidelines and policies. A borrower needs to fulfill this criterion to get loan approval.
Interest Rate Charged For the Loan
The personal loan interest rates are the defining factor for both the lender as well as the borrowers. The loan agreement clearly mentions how much interest rate will be charged for the amount approved. The interest rate specified in the agreement is the written confirmation you needed and leaves no space for ambiguity. The document also includes the period for which the interest rate is calculated. The duration is usually yearly, but it differs from lender to lender.
Tenure of the Loan
During the discussion, you might fix the tenure of your personal loan. The lender then mentions this in the loan agreement. It is imperative to check the tenure as it will decide the repayment time for your loan.
Free look Period for the Loan
Some lenders have a free-look period, which you should know about. A free-look period is a time when you can choose to cancel the loan after disbursement. This can happen for various reasons, such as not agreeing to the terms or no willingness to take the loan. The free-look period ids an option in which you can choose to cancel the loan. The amount disbursed needs to be in your account as it is. It will then be credited back to the lender from your account. Not all lenders provide this service. SO you need to check for this before you sign the agreement.
EMI Amount to Be Paid Each Month
As per your total loan amount, the personal loan agreement will also mention the amount of the EMIs. This will give you clarity on the specific amount you need to pay off each month. If you want to get an estimate of the EMIs before you apply for the loan, then you can use the EMI calculator for personal loan for this purpose.
Lock-In Period if Any
Many personal loan companies have different lock-in periods of their own. The lock-in period is regarding the pre-payment of the loan. Many lenders prefer a lock-in period of 12 months before they allow borrowers to foreclose or make pre-payments for the loan.
Pre-Payment Penalty if Any
If you want to Pre-pay the loan, then some banks or NBFCs will charge you a minimal fee for it. This is mentioned in the loan agreement, and you need to make sure you check it.
A default scenario is when the borrower is not able to pay off the EMIs. In such cases, lenders charge a penalty if you miss an EMI. The amount for this penalty is clarified in the loan agreement.
Taking a personal loan online also required you to read the loan agreement. So make sure you are all clear before you sign the dotted line. It is crucial that you are prepared to repay the personal loan you avail.