Red Flags in a Personal Loan Agreement
A personal loan is one of the most easily available credit options, and that is why it is important to stay alert when you are applying for it. These days, a lot of scams are happening around personal loans. It is important to verify the lender and check all the terms and conditions when you are applying for a personal loan. Read on to learn more about some of the red flags in a personal agreement.
Red flags to check in a Personal Loan Agreement
Some of the common red flags to check out in a personal loan are as listed below:
1. Offer Too Good to Be True: Be aware of personal loan offers that promise instant approval without any background checks, an extremely low interest rate, or no processing fees. If an offer seems too good to be true, always verify all the details thoroughly before signing the personal loan agreement.
2. Pressure to complete all the formalities immediately: Scammers or fake personal loan lenders often create pressure around process completion. If a loan lender is requesting you to sign the agreement soon to avail yourself of a limited-time offer, this could be a scam. A reputable loan lender will give you time to review the personal loan agreement paper.
3. Lender does not have an office or customer support: If your personal loan lender does not have any office address or customer support, there is a chance he is a fraud. It is important to verify if your lender is registered with the Reserve Bank of India (RBI). Before you sign the loan agreement, check the lender’s physical office and try to find out more about the lender from other customers.
4. High prepayment penalty: Before you complete the agreement formalities, do check the prepayment charges. If the lender is levying a hefty prepayment charge, then you should reconsider opting for a personal loan. You also need to check if the lender is levying any additional fees.
5. Incomplete written agreement: If the lender is committing verbally about flexible loan terms and not giving them in writing, it is a red flag. It is essential to take all the terms and conditions in writing in the agreement to avoid any confusion in the future.
Points to note when signing a Personal Loan Agreement
The below-listed are some of the points which you should make a note of when signing a personal loan agreement:
- Rate of interest charged: When you are signing a personal loan agreement, check the rate of interest mentioned in the document. Do ensure that the interest rate mentioned is the same as what you discussed.
- Fees and charges: Check the processing fees levied, loan foreclosure charges, late payment fees, etc. It is important to stay aware of these charges, as they can add up to the cost of your loan.
- Check the disbursement details: This is another portion of the loan agreement which you should check to ensure that the bank details provided are accurate.
- Repayment schedule: Do check the loan repayment schedule and ensure it is similar to what was discussed with you.
FAQs on Red Flags in a Personal Loan Agreement
- What do you mean by prepayment charges?
A prepayment charge is a type of fee which you need to pay if you choose to settle the loan early.
- Is there any way to verify if a lender is legitimate?
You can check if the lender is legitimate by checking if he is registered on the RBI website.
- Is it safe to apply for a personal loan online?
Yes, it is safe to apply for a personal loan online if you are applying from a reputable bank. In the case of a Non-Banking Financial Organisation (NBFC), it should be registered on the RBI website.
- Is it possible for the lender to change the rate of interest after the personal agreement is signed?
Yes, the lender can change the rate of interest after the personal loan agreement is signed if you have opted for a floating rate of interest. In the case of a fixed rate of interest, the lender cannot change the interest rate once the personal loan agreement is signed.
- Should I get a signed copy of the personal loan agreement from the lender?
Yes, it is extremely important to get a signed copy of the personal loan agreement from the lender and keep it safe for your records. The signed agreement serves as legal proof of the terms and conditions that both you and the lender have agreed upon. In case of a conflict or any miscommunication, a signed copy of the loan agreement can be very helpful.
Disclaimer
Credit Card:
Credit Score:
Personal Loan:
Home Loan:
Fixed Deposit:
Copyright © 2025 BankBazaar.com.