What legal tricks do you need to watch out for loan agreements?
Legal tricks are used by entrepreneurs from almost every industry. Therefore, we should carefully read the content of the signed document, especially when our money is at stake. Undoubtedly, a conscious decision to take a loan and careful reading of the contract we sign with the lender are the keys to success, which is a safe loan. This means financial support that guarantees us the protection of our interests and whose conditions are clearly presented to us and do not change during the duration of the commitment. What legal tips should be considered for loan agreements? Let’s take a closer look at this topic.
Do you remember the scene from “Shrek”, when the main character is indignant that no one has warned him that before he rescues the princess, he will have to defeat the dragon? Then his comrade Donkey suggested to him that maybe this was in the contract, but “a small print.” We laugh at such situations, but there is a lot of truth in them – in fact, we rarely read the contracts we sign, assuming that the other party will not use our rush to further enrich. In other situations, we just don’t want to make too much effort.
It is often heard that companies from various industries write so-called a small print of content harmful to their contractors. They smuggle in legal tricks, whose meaning and consequences can be felt really painfully, especially when it comes to a loan agreement. In most cases, we will probably get out of it unscathed, but let’s not rule out that the moment will come that for this moment of inattention we will have to pay dearly. Although the Polish Financial Supervision Authority is guarding the integrity of banks and lending companies, this does not mean that we are to assign responsibility for the documents we sign. Let us consider that legal tricks are still legal (after all, lawyers create them), but not necessarily honest and ethical.
Why don’t we read loan agreements and more?
We wrote that the fact that contracts were not read, also by borrowers, results from haste or laziness. However, there is a third option – even if we want to read all the entries in the document, we do not always understand them and often do not know what in fact we should look for in them not to be deceived. It doesn’t matter which of these positions is closest to us, the recommendation remains the same. Let’s read the contracts and treat them as a benefit, not a waste of valuable time. Only they will provide us with legal and financial security, so they cannot be underestimated.
What are the legal trumps in loan agreements?
Including the so-called loan agreements legal credits are the result of long-term observations of the loan sector. They show that customers who are very keen to get cash quickly focus mainly on achieving this goal. The amount of financial support is the most important for applicants. Some do not even pay attention to the loan period. Getting the missing money is simply a priority. On the other hand, we postpone reading the provisions of the contract and the terms of the loan granted by the institution to the second or further background. This space is perfectly used by loan companies, which, in addition to imposing a certain interest rate, want to recover additional money without violating the law. There are two options: we will either ask a company advisor (or external, not affiliated with any institution) to trace on our behalf all the documents needed to obtain the loan, or we will deal with this problem ourselves.
What are the legal trumps in loan agreements – let’s ask an advisor
In the first case, it would be good if the adviser explained to us the three most intricate issues that laypeople can’t get through. Let’s start with additional fees related to reminders sent by the company due to delays in repayment of the loan. Let’s ask about the way of contact (letters, telephones, SMS messages) and the price of such prompts.
Another issue is the loan repayment terms. It is important that we know before the conclusion of the contract whether the loan is to be paid in installments, or in full, by bank transfer or cash. This seems a trivial matter, but such a legal trick may generate further costs that we will have to face. Finally, let’s ask an advisor about recovery fees. Let’s not exclude that this problem will not affect us – we never know for sure. If the contract does not specify, for example, an upper limit for the recovery fee, this should raise doubts, as it may be very high. And certainly this amount can cause that knowledge about it would discourage us from signing the contract.
What to look for when signing a loan agreement?
We do not need a PhD in finance and accounting to deal with loan agreements on our own. The advisor person inspires greater confidence and certainly has more knowledge and experience, but reading financial documents is nothing that we could not cope with.
What to look for when signing a loan agreement? First of all, for “small print” entries, any hooks we have already mentioned. This is one of the methods most frequently used by lenders to hide certain conditions for granting a loan. Let’s also carefully read the table of fees and commissions. Let’s make sure that the interest rate on our loan is constant or changes (increases) after a certain time. We will also determine whether the loan company will impose any fees on us for early repayment of the obligation and, importantly, calculate the total cost of the loan ourselves.
Why is this so important, if the loan calculator on the lender’s website or an advisor at the company’s headquarters can do it for us? Knowing the difference between your faces and what appears on the loan agreement, we will have the full right to ask the question where it came from. Thus, we will reveal the hooks of the loan agreement that the lender will try to smuggle in, counting on our inattention and trust in the institution.
Legal tricks in loan agreements
Should the existence in the financial sphere of something like legal tricks be a warning to us against entering into any contracts with lenders? Maybe it is better to ask your friends or family for help than agree to cooperate with a bank or a loan company? We remain far from such conclusions, because financial products, like those we buy in stores, are intended for people and will not harm anyone if their purchase is thought out.
When choosing a lender, let’s follow the rankings of the most-appreciated ones, get the opinions on the internet and carefully assess our financial situation.
Let’s read the loan agreement!
Nobody puts a gun in our heads when we sign the loan agreement. It depends on us whether we will approach the subject wisely and whether we read all documents beforehand. By doing so, we protect your interests and the contents of your wallet. Therefore, it is worth arming yourself with knowledge about legal tricks and patiently go through the process of formalities.