Essential Facts to Know about a Personal Loan Agreement

Updated on: 19 Jan 2024 // 4 min read // #mmm news
Author :(534 posts)

Personal Loans have emerged as one of the most popular financial products today. Such is the popularity of Personal Loans that all leading financial institutions of India are now offering Personal Loans to their customers.

These financial institutions offer Personal Loans for a wide range of requirements and have eased out the eligibility criterion for applicants as well. For instance, you can now Apply for Yes Bank Personal Loan for sponsoring your foreign trip or planning your destination wedding. With the relaxation in conditions for approving a Personal Loan application by the financial institutions, more and more individuals are looking to apply for a Personal Loan.

More about Personal Loans

Personal Loans are unsecured loans that are offered by a majority of financial institutions in India. The application process is hassle free. As no collateral or security is required, the it is processed within a few working days. The repayment tenor can extend up to five years, depending on the lender you apply with. Moreover, you are free to use the amount availed as a Personal Loan according to your requirements. There is no need to inform the lender regarding the same.

How to Apply for a Personal Loan?

Whether you are seeking a Yes Bank Personal Loan or PNB Personal Loan, the process of application has been made effortless. Here are the steps involved in the process.

You can apply for the Personal Loan on the bank website or by visiting the branch or with the help of online financial service providers.

You need to fillin the form and attach the required documents for processing of the application.

Once you submit the application, it is processed by the financial institution in a few working days.

If required, you will have to submit some more documents or answer the questions from the lender.

If your application is approved, you will need to sign the Personal Loan agreement along with other documents for the disbursal.

Once the amount is credited to your account, start making the repayments according to the loan schedule.

About Personal Loan Agreement

The Personal Loan Agreement is an important document. It includes all the terms and conditions pertaining to the loan along with the rights and duties of both the parties. As it is a detailed document, the length can go up to several pages. By signing the Personal Loan Agreement, you give your consent to the lender regarding every condition mentioned. It is an irrevocable document which is valid until you have repaid the entire amount and have obtained the NOC from the lender.

In many cases, people tend to take the Personal Loan Agreement as any other document, but it is not so. This is a legally binding document governing the entire terms and conditions pertaining to the Personal Loan availed by you. You must, therefore, read the agreement carefully and sign it only when you are satisfied with all the terms and conditions mentioned therein. If there are any questions or doubts, feel free to seek clarification from the lender.

Important Clauses in Personal Loan Agreement

Following are the important sections that are included in a Personal Loan agreement: –

  • Personal details: This includes the personal details of both the parties, including name and addresses.
  • Financial details: The total amount that has been borrowed by the applicant along with the applicable rate of interest and repayment tenor. The amount of EMI is also mentioned in the loan agreement.
  • Penal charges: Details pertaining to penalty charges or fines applicable in case of default in payment are also included along with cheque bounce charges.
  • Foreclosure Information: Information pertaining to the option of foreclosure along with foreclosure charges, lock-in period, NOC, etc. are also included in the agreement.
  • Free look period: Every personal loan agreement has a free look period. This period usually ranges up to two days, wherein you can cancel the Loan if you do not agree with any terms or conditions. For this option, the entire amount should be present as it is in your account. The amount will be debited from your account, and the loan will be cancelled.
  • Legal options: The Personal Loan Agreement also consists of the legal options available to the lender to recover the amount in case of any defaults. It also specifies the information pertaining to the jurisdiction of the courts governing the agreement.

When you sign the agreement, you give your explicit consent to all the terms and conditions mentioned in the document. Therefore, you must be careful while signing along the dotted line.

Checking the Personal Loan Agreement

As the personal loan agreement is a legally binding document, you must check in thoroughly before signing it. Here are some tips that you can follow while checking the agreement:

Ask for a physical copy of the agreement and read it properly. Do not rush into signing it.

If you have any doubts regarding any clause, seek clarification from the representative of the lender.

You can also seek a professional guidance from your Lawyer or Chartered Accountant regarding the loan agreement.

Only if you are completely satisfied with the provisions of the agreement, go ahead with signing it.

When you Apply for a Personal Loan, you are undertaking a significant financial decision. Therefore, you need to be careful with all the aspects associated with the Personal Loan Agreement. No matter how urgent your need is, rushing into the process is not the way to go. Take your time, understand each point carefully and only when you are completely satisfied, should you go ahead with the process. Remember, future is uncertain, and you should not end up with something that you regret later.