Loans can be a perfect tool for which you can be empowered to make major decisions and actions that will ultimately define your financial future. Of course, you have to learn about the basic loan principles and how banks and similar lending companies provide this form of financing services. If you cannot easily make the distinction between secured loans and unsecured loans or if you do not know what APR stands for, then it is imperative that you read references about these topics and other subjects related to loans and credit.
Beyond the basic issues and topics about loans and credit, there are still some critical information and concepts which you have to carefully study and understand. However, these information and data are not readily divulged and openly discussed by banks and other lending companies.
It is imperative that you read the fine print of the loan agreement before you append your signature above the dotted line. Beyond the terms and conditions which may be discussed to you by the banks, there are still a lot of things that may not be presented to you in detail. It is important that you discuss and clarify the following:
• Acceleration Clause of Bank Loans
There are some banks that integrate a special provision in the loan agreement that allow them to “accelerate” the terms by which a particular loan account becomes due. This is normally the consequence of missed payments. In fact, some banks are given the authority to foreclose on a particular loan without prior notice to the borrower.
• Provisions for Prepayment of Loans
Believe it or not, some banks are not happy if you pay down your loan earlier than the agreed payment date. Thus, the loan agreement may contain provisions for prepayment where the borrower will have to pay a penalty fee. This is normally the case when you settle the remaining mortgage balance before the due date.
• Interest Rates of Loans
There are various types of interest rates, and the interest rate would normally depend on the kind of loans available, the source of the loan and your credit rating. This would mean that the interest rate of your car loan is completely different from the interest rate that will be applied when you avail of mortgage loans. Additionally, a person who has a low credit score may avail of bank loans at a much higher rate of interest.
Unless you specifically ask for it, most banks will not tell you that you are qualified to get a lower interest rate on your loan after making a specified number of payments. The reason for this is that banks don’t want their borrowers to avail of the refinancing option as this will affect the returns of their investment.
