It is a wonder why most people only know 2 things about their loans. The quantum they borrow, and the monthly payment amount they have to make. Most people don’t even notice when administrative fees are directly deducted from the disbursement. Because usually when someone is getting a loan, his focus is probably on getting his hands on cash as soon as possible to alleviate immediate cash flow problems rather than worry about payments that are coming up.
You would want to learn about the details of your loan for a few reasons. The most common being that you want to know exact what are the terms governing penalties, redemptions, interest rates, etc. Another reason could be that you are taking steps to reduce, manage, or get out of debt. The first step then will inevitably be to understand what exactly you have signed up for.
The one thing that we instinctively pay attention to are interest rates, fees and charges.Fee you could be required to pay upfront are things such as application, settlement, underwriting, etc. Ongoing charges can include annual, monthly, even for statements, etc. Back end fees can include those for termination, exit, etc. Then there are those for adhoc items which you can never predict. It is therefore important to learn about what you have signed up and agreed for. Below are 16 facts you should learn about regarding your credit facilities.
1) Disbursement amount. Take note of fees and charges directly deducted from the loan.
2) Current outstanding principle balance. Take note that repayments consist of principle plus interest.
3) Remaining term. Surely you would want to know when you will fully repay your debt.
4) Check whether a lump sum is payable upon the end of term.
5) Current interest rates you are paying for the facility.
6) Nature of interest rates. Are they based on a flat rate, reducing rate, effective rate, etc.
7) Ongoing fees that come with the facility. For example, annual fees.
8) Are the interest rates adjustable or fixed.
9) Composition of your repayments. Do they make up interest only or interest with principle.
10) Is it secured to an asset, or you have provided a personal guarantee, or both.
11) Who are the borrowers and who are the guarantors.
12) What happens to excess payments. Do they reduce the principle, or do nothing.
13) What are the terms for partial and full redemptions. You are looking for penalties.
14) Is there a minimum amount to make for partial redemptions. And do they come in payment blocks. For example, minimum $10,000 in $5,000 blocks. Meaning you are only allowed to make redemptions in multiples of 5,000.
15) What are the administrative fees for re-pricing, tenor change, restructure, etc.
16) How repayments are made. Is it through a repayment account, directly deducted from your personal account, deduction from your payroll, etc.