10 Terms to check in a Personal Loan Contract

Loan terms mean the conditions agreed when taking a loan. Some of them are; the duration of loan repayment, the interest charges on the loan, any costs the borrower is likely to incur, and several more conditions that may be considered. Reading the loan terms and conditions should be done in a careful manner so as to have better appreciation of the obligations that come with the loan agreement.

Let's review each of the ten terms in a personal loan contract in more detail:

1. Interest Rate

Interest rate that is levied on the loan amount is computed and expressed in a percentage.Check if the cost is variable or fixed.

2. Annual Percentage Rate

This is the interest rate charged on the credit along with any other fees. It is a much better representation of the effective price of the loan.

3. Loan Amount

The total amount of money that you are required to pay so as to get the loan. Be sure it meets your needs and your pocket.

4. Loan Term

Approximately how many years or months you have to repay the lender for the interest on your loan. The amount that you have to pay each month is also affected by this.

5. Monthly Payment

The periodic payment is the amount that you will have to bring to the table every single month. Make sure that you meet your financial plan for the business.

6. Fee and Charges

It is important to search for the origination fees, late payment add ups, prepayment penalties, and other charges that being a borrower you might have to pay for getting a loan.

7. Repayment Schedule

 Information specifying the terms when payment is expected and how often the employees are paid – weekly, fortnightly or monthly among others.

8. Default Terms

Be informed about what a default means, such as the number of months allowed before a payment is considered missed or the meaning of default terms and conditions, penalty charges and risk to credit score.

9. Prepayment Penalty

Determine whether there are any charges which the client is subjected to if he wants to clear the loan early, this will help the client avoid missing out on the amount of interest he or she would have actually saved had the loan been cleared within a certain period of time.

10. Collateral Requirements

Find out if the loan is unsecured or secured (which is backed by securities). This influences the lender's rights in an instance of default as well as your risk.

Conclusion

When you take time to review all these terms, it will put you in a better position to decide on the personal loan you want to take. The meanings of each term should be explained and their relevance in a broader spectrum of finance estimated. If there is anything that you fail to understand you should consult the lender or consult an independent financial advisory service. This can help you keep off the wrong options and get the loan that will suit your needs most.