A loan agreement is a binding contract between the borrower and lender to formalise the loan process and spell out the loan schedule and terms associated with the loan amount, interest rate, repayment terms, due dates, etc. Depending on the loan amount and purpose, a loan agreement form may range from a relatively simple letter with basic loan details to an elaborate document consisting of intricate details. Regardless of the agreement type, the judiciary guidelines govern it to ensure the loan terms are legal and reasonable.
Agreements are helpful for both the lenders like us and borrowers like you for various reasons. It is a legally binding document that protects the interests of both parties if one fails to honour the other party's rights. It helps lenders in the following ways:
You, as a borrower, can benefit from a Personal Loan agreement in the following ways:
Generally speaking, a loan agreement is beneficial every time you borrow money. It formalises the application, approval, disbursal, and repayment terms, producing positive impressions and results for both parties. A loan agreement is helpful not only while borrowing a Personal Loan from Hero FinCorp but also in the following situations:
A loan agreement typically includes crucial details about a loan transaction, including the following:
Before signing a Personal Loan agreement, you must understand the standard legal terminology used in the document. These are a few essential terms you must know:
Familiarise yourself with the loan agreement thoroughly to properly understand the Personal Loan terms and conditions. It is best to obtain a legally binding contract and read it thoroughly to know the transaction details. When you avail of a Personal Loan from Hero FinCorp, you get an all-inclusive loan agreement to help you understand the terms, eliminating confusion.
Remember to review the loan agreement carefully and contact customer support if needed to ensure a comprehensive understanding of the terms and conditions. Here we have panned out a few important things.
While applying for a new loan it is important to find out beforehand whether you meet the eligibility criteria. This includes age, income, credit score, and employment status. Checking off all these increases your chances of loan approval.
Now, the next thing you need to be careful about is the documents involved, such as identification proof, address proof, income proof. To complete the loan application process smoothly, you’ll require these documents.
Personal Loans are one of those loans which gives flexibility in usage. But you do need to understand any specific restrictions on loan utilisation outlined in the agreement. This way you can avoid violating lenders terms.
Thoroughly reviewing the interest rate is necessary, as it directly impacts your loan cost. Confirm with the lender whether it is fixed or variable and understand the implications.
Take note of the loan tenure mentioned in the agreement, the maximum tenure allowed is five years. Understanding the repayment period will help you plan your finances and ensure timely repayment of your loan.
Check if the agreement allows part-payment and are there any charges or conditions associated with it. Understanding this option can help you manage your loan effectively. Suppose in case you encounter any bonus, you can use that money to reduce your loan burden and save on the interest payable.
Familiarising yourself with the consequences of missed payments is important, and this includes late payment penalties, increased interest rates, and potential damage to your credit score. When a loan remains unpaid for a longer period, the credit score starts reducing and the debt keeps on increasing.
Be aware of any additional charges mentioned in the agreement, such as processing fees, prepayment penalties, or charges for documentation or loan restructuring. Because when you are aware of these, you’ll know what’s coming your way.
If applicable, understand the obligations and responsibilities your co-applicant or guarantor has for the loan. Ensure all parties involved are aware of their roles and liabilities.
Defaulting on a Personal Loan can have the following consequences:
This brings us to personal loan default legal consequences in India, which can lead to severe financial repercussions. So it is essential to meet your loan obligations, communicate with the lender in case of financial difficulties, and explore alternatives like loan restructuring or repayment plans to avoid defaulting.
Stamp duty for a Personal Loan agreement varies by state and a nominal fee is paid to the government to make the agreement legally enforceable.
The Rule of 78 is a method used to calculate prepayment penalties on Personal Loans. It allocates more interest in the early stages of the loan term.
Yes, with a Flexi loan, you can withdraw money up to the approved limit as per your convenience and repay it within the agreed repayment terms.
Hero Fincorp offers a wide range of financial products including Personal Loans for personal needs, Business Loans to support business growth, Used Car Loans for purchasing pre-owned vehicles, Two-Wheeler Loans for bike financing, and Loan Against Property for leveraging real estate assets. We provide tailored solutions with quick processing, minimal paperwork, and flexible repayment options for smooth and convenient borrowing experience.