Loans are regular financial assistance offered by banks, institutions, and licensed moneylenders. For the lenders, it is a money-making business through the interest charges and fees which result in profits. For the borrower, it a means of bridging a financial gap in order to acquire a product or service that the borrower could not afford in cash.
Both sides benefit from the transaction. However, given the rise in the number of lenders in the market, it is important for a borrower to consider various factors before signing a loan contract with a lender. This helps borrowers to work with a lender who best fits their interests and minimizes chances of running into problems during the contract.
Before entering into a loan contract with a licensed moneylender, a borrower needs to explore other alternatives as well. For example, government agencies often provide financial assistance schemes that may have better terms when compared to other providers. It is safe for a borrower to contact the agencies to find out more about such services before dealing with private moneylenders.
It is always safer for a borrower to consider that loan contracts are legally binding and once signed the borrower must comply with all obligations stated in the contract. Therefore, a borrower needs to be sure of the ability to abide by the terms of the contract based on his or her income and financial obligations. It is advisable to borrow only what one needs and is able to repay. Loan repayment defaults have consequences that may not only affect the borrower, but can extend to family members as well.
The law requires a lender to explain to the borrower all the terms of the contract in a language the borrower understands. The borrower needs to understand fully the contract with special emphasis on the repayment schedule, interest rates involved, and any additional fees that are applicable. In addition, the borrower needs to deal with more than one service provider before finally choosing one that best fits their interests.
Eventually, loans are good because the borrower is able to acquire a product or service. However, borrowers need to know that defaulting loan terms can lead to severe economic and emotional consequences. Failing to honor the contractual terms can lead to repossession of a property, auction, or other forms the lender may choose to recover the capital. It is therefore important to revise prevailing economics and personal financial capability before entering into a loan agreement.