A borrower refers to an individual or a company which owes money to some other individual or company which has played the role of a lender. The borrower is usually asked to make interest payments periodically, and pay off the outstanding principal on a given date. The loan terms are usually spelled out in details in a written document which is to be signed by both the borrower and the lender.
Rights of a borrower
Borrowing is a comparatively easier process than facing the reality of making monthly payments in order to repay a loan. Moreover you can certainly take legal actions when you face a problem with regard to your lender. However, it is always wise to exercise caution beforehand and follow a few rules when you look around for the right credit provider.
• You must get to know the kind of security that is required against your loan. Thus if you obtain a home loan, you will be required to mortgage your property to the financial institution till the time the loan is paid off.
• You should be clearly told by the lender/financial institution of the interest rate that you are to face while repaying the loan and also the frequency of your payments – (whether weekly, or monthly).
• You must also be told whether you are being charged flexible or fixed rates of interest.
• The total amount that will actually be paid throughout the loan term in dollars.
• You should also try and find out if there are other hidden additional charges which are adding to the interest payments making the loan heavier. A loan maintenance fee is an example of such extra charge.
• The credit provider must inform you about the loan tenure or the total period of payment of the loan.
• You should also get to know the associated risks in case you fail to pay back the loan.
• The financial institution that provides you the loan must also abreast you about any penalty clauses attached to loan prepayment.
• You should also ensure that the contract you are getting into has been covered by the Consumer Credit Code. Under the Consumer Credit Code, certain matters like amount of credit, annual percentage rate, method of interest calculation, and credit fees are some of the issues which are discussed.
As a home loan borrower, you should get to know your credit rating and score: Your credit report and credit score will help you get the best loan. You may get your credit score online or a lender can give you a complimentary copy after you apply for a loan. Look out for any errors in your credit report and take action to amend it. Shun lenders who do not disclose your score. Credit scores generally move in the range from 300 – 850. A score of more than 700 is usually considered ideal by lenders.
Take time to shop around and compare deals and choose the loan you think should be ideally suited to you, not what a lender or a broker recommends.