Know Your Rights as a Borrower:
When you enter into a loan agreement, then you have certain rights which are protecting you, including the right to select the best loan for yourself, the right to ask for a good faith estimate of loan charges, and you also have the right to know how much the mortgage broker is receiving in fees. As consumers of financial services, it is important to educate yourselves on the rules and regulations of the country and it is necessary to know your rights as a borrower. It is most important to aware yourself of these rights in order to avoid mortgage scammers and help yourself to get the best loan for your needs and requirements.
From applying for a passport to applying for a loan, everything has a set of procedure which is necessary to follow. The clear knowledge of these procedures will help you to get your work done in the most effective way without any scammer. In relation to borrowing and refunding the loan from any bank or other financial institutions, the Reserve Bank of India (RBI) has kept certain rules and regulations, which are known as the Fair Practice Code, to safeguard our interests. The RBI has taken valuable steps to protect your interests when it comes to borrowing money. However, it is also up to you to educate yourselves on your rights, so that nobody can take advantage of yours.
This article will help you to know about some laws which you need to keep in mind to make sure that nobody can take advantage of yours:
1) Laws for Loan Application Process
- Application Form: The loan application form plays a most important role in the loan application process. The first thing which is important to ensure that the loan application form provided by the lender should have all the necessary information which you require to make an informed decision. The terms and conditions should also be stated on the form properly so that you can easily compare the offerings of one lender against other lenders.
- Document Review: The document prepares for the loan will be drawn by the lender. Before signing into the loan application form, make sure that you understand all the documents including the amount and number of monthly payments that are required, the fees that being charged on the loan, and whether or not there are any penalties if you want to repay the loan early. If you have any question or you are unsure of something, so you don’t be afraid to ask. The clear knowledge about the documentation helps to protect you from any fraud.
- Receipt Acceptance: After you submit your loan application form, it is necessary that the bank or other lenders should give you some sort of acknowledgement that they have received the application. It can be a receipt or any kind of acceptance letter. Ideally, they should also let you inform that how long it will take for them to appraise your loan application.
2) Laws for Loan Appraisal Process
- The Loan Amount: The loan amount is the main aspect of the loan application, it is the thing for which you have to take a loan. Once your loan application is approved, the bank or financial institution has to let you know the amount of the loan which is sanctioned in writing. The written communication has to be in a simple language that we easily understand and it should include all the terms and conditions regarding the loan.
- Interest Charges: The rate of interest is also a very important factor in the loan application. It decides the amount on which you would pay the EMI every month. If you don’t pay the EMI on time, you would pay some penalty on that loan amount. It is necessary that the rate of interest and penal interest charges for late repayment should be clearly mentioned in the loan agreement.
- The Legal and Technical Verification: If you are applying for a home loan or loan against property, so the validation and verification process plays a very important role in the loan application. The validation and verification of properties from a legal and technical aspect make an important part of checks and inspection of the home loan process. A large amount of the home loan amount depends on the legal and technical valuation of the property. Banks and other financial institutions verify the property against which the loan is taken. Some banks and financial institutions provide secured home loan, in which the property is used as a security or collateral. This is the reason why you are asked to submit original property documents (like Title Deeds, No Objection Certificates of authorities and other ownership papers) to the lender. These ownership documents remain in the custody of the lender until you fully repay the loan.
3) Laws for Disbursement of Loans
- Change in Terms and Conditions: Reserve Bank of India (RBI) has laid down a law against the changes in terms and conditions. If there are any changes proposed in the disbursement schedule, interest rates, services charges, prepayment charges or any other terms and conditions, the financial institution or lender has to notify you in writing.
- Release the Securities: If you have given any security to the financial institution or lender for the loan you have taken, they have to release the security after you repay all the dues. However, if you fail to repay all of your outstanding balance, then the financial institution or lender has the right to auction the security to recover their outstanding balance. Prior to taking such an extreme step, the financial institution or your lender has notified you and provided you prescribed time duration so that you pay all the outstanding dues before auctioning your security.
4) Other General Laws
- Interference of the Lender: The financial institution or other lenders from which you have taken your loan does not interfere in your general affairs unless the loan agreement provides the right to them. Though the rule is not applicable if the information is withheld, & that information is brought to the attention at a later time to the financial institution.
- Quick Response by the Lender: If you request for transferring your loan account, the bank or other financial institution should either accept or reject your request within 21 days of receiving the said request. If the bank or other financial institution accepts your transferring request, the transfer should happen in a transparent manner and should be in accordance with the law.
- Recovery of Loans in Appropriate Manner: The bank or other financial institution cannot have recourse to undue harassment of the borrower in order to recover their loans. They are not allowed to call you at an odd time, or they cannot physically intimidate you. All the staff of the banks or financial institutions are expected to be adequately trained to deal with customers in an appropriate manner.
- Complaint Redressal: Every bank or financial institution should have a suitable complaint redressal system. The purpose of this complaint redressal system is to allow borrowers to approach the bank or financial institution and make a complaint in the case of any Fair Practice Code terms being ignored.