Individuals often find it tough when they have to wade through the fine print to get the desired information. You encounter this problem when you go for a loan as it is not easy to know all the information about various conditions as well as charges. The Reserve Bank of India has asked banks to display various details such as the cost of loans on their websites and also to inform customers about it so that they are able to make correct comparisons.
Here is a look at the various details one should take note of:
Loan processing fees: There are several items that will constitute the total cost that has to be paid for a loan and one of the starting point is the processing fee. This is the time when various documentation related to a loan has to be completed. There are several charges that will have to be paid by the borrower, including the cost of stamp papers, processing fees and others. The lender is supposed to clearly mention these to the borrower.
Refundable fees: There are fees that are collected upfront from the borrower when they ask for a loan.
However, there may be a situation where the loan may not be sanctioned or disbursed. In such a case, the borrower will be interested in knowing how she can reclaim the expenses. In such situations, the fees that would be refundable should be mentioned clearly.
Prepayment charges: There is always the possibility that the borrower will come back at some point of time to prepay the loan when she has additional funds. In such cases, lenders often slap a prepayment charge. So, the conditions under which prepayment charges will be applicable and the amount should be disclosed clearly.
Delayed repayment: There can be an opposite situation where the repayment of a loan is not possible for the borrower due delay in cash flows. In such a situation, the charges that would be levied should be mentioned.
This will help the borrower understand the impor-tance of paying the loan on time.
Switching loans: There may also be the need for some borrowers to switch a loan from fixed interest rate to floating interest rate and vice-versa. The lender may seek to enforce a conversion charge in such a case. This will play an important role in the decision to switch a loan.
Interest reset clause: Any change in interest rates might be possible even in case of a fixed-rate loan. If the borrower is not aware of the position, then she may get a shock. This is why banks have been asked to intimate the borrower about such a clause beforehand.
