Loan Contracts and the Small Print
It’s a strange but true fact that many people never read the small print of any contracts. Loan contracts and the small print contained within them are there for a reason; to make the customer aware of the expectations, rules and obligations of both parties. If a customer decides to ignore the small print then they may also miss the clauses that could see extra charges applied to a loan.
Reading the Small PrintContractual problems can occur if the customer does not read the small print before signing the loan contract. The terms and conditions of the actual loan will be included in the small print and if a customer signs the contract then it will be assumed that they have read and agreed to all conditions, even if they haven’t.
Not reading the small print can come back to haunt customers, especially when it comes to missed payment charges. The terms and conditions of any loan should mark down any charges that will apply to late or missed payments, and these charges can be up to £30 per missed payment. Some lenders will actually compound charges and interest every three days if the money is not placed into the account to cover the missed payments.
Binding ContractsAs soon as the customer signs on the dotted line then the loan contracts and the small print becomes legally binding. This does not mean that lenders can place any terms and conditions that they want to into the contract. It does mean however that terms that have been applied and are legally acceptable become binding between lender and borrower. If the customer breaks any of the terms and conditions then they will be in breach of contact and consequences can occur.
Small Print Clauses to Spot.Within the contract terms and conditions, which are usually typed in minuscule lettering, there will be some charges and conditions to look out for. These will include:
- Details on defaults and secured loans.
- Charges for missed and late payments.
- Accrual of interest to missed and late payments.
- Early redemption fees.
- Extra interest for payment holidays.
- Details of fees for transferring loans during the loan period.
- Details of Protection Payment Insurance.
Avoid Being caught OutThe best way to avoid disputes over any charges detailed in the terms and conditions is to read the small print, even if it means taking the contract home with you. Keep an eye out for any payment protection insurance that has been added onto the loan. Payment protection insurance is voluntary but many lenders will simply add it in without telling the customer in the hope that the customer will not read the small print. Lenders make a great deal of money on payment protection policies but it is the customer’s choice as to whether they accept it or not.
Interest Free LoansInterest free loans will have their own specific terms and conditions regarding annual percentage rates. With interest free loans you will not be charged interest unless you miss a payment. The interest will then be added and back dated to the start of the loan. Always check the interest rates that are quoted in the event of a missed payment; these interest rates are likely to be much higher than normal loan rates.
A Very Serious ClauseOne of the most important clauses in loan contracts will be the consequences for non payments on secured loans. Loans that are secured on property will have terms and conditions written in regarding repossession and defaulted loans. They should inform the customer of the consequences and actions that can be taken if a secured loan is defaulted on.
There are set guidelines that a bank must adhere to before any repossession can take place. These should include an offer to extend the length of the loan or lowered repayments. Court action will be needed if repossessions are to take place and it is a long and lengthy procedure. Customers who are considering secured loans should always thoroughly read the loan contracts and the small print in order to be aware of their rights.
Loan contracts and the small print can seem confusing to the untrained eye but all of the terms and conditions must be understandable to the customer. If the small print or any of the terms are not clear then always ask for clarification before signing any contract. This will help avoid disputes at a later date, and will make the customer more aware of their obligations and requirements.