Loan Agreement: Often, when taking a loan, people focus only on the interest rate and EMI and sign the agreement without thinking. However, the loan agreement contains several terms that define your rights and responsibilities. Ignoring these can lead to future financial loss, disputes, or even legal problems. Therefore, it is crucial to read and understand the agreement, from EMI defaults to prepayments.

1. Interest Rate and Charging Method
The agreement states whether the interest rate is fixed or floating. Fixed rates remain unchanged for a fixed period, but floating rates can fluctuate depending on the market. Interest can also be charged on a daily, monthly, or annual basis. This difference significantly impacts your finances.

2. Prepayment and Foreclosure Rules
If you want to repay your loan early, many banks/lenders charge a prepayment charge. Therefore, review the loan agreement to understand whether repaying the loan early will actually be beneficial or detrimental.

3. Hidden charges
In addition to interest, there are also many hidden costs, such as processing fees, documentation charges, late payment penalties, and check bounce charges. It's important to understand these clearly to avoid surprises later.

4. Secured Loans and Default Clauses
If you default on a secured loan, such as a home loan or car loan, the bank can repossess your home or vehicle. Carefully read the terms of "default" in the agreement. Sometimes, even a single late EMI can result in significant penalties.

5. Flexibility and Borrower Rights
Some loans offer EMI holidays, step-up/step-down EMIs, or balance transfers, while others do not. In case of a dispute, the settlement process is also spelled out in the agreement. It's beneficial to understand these rights in advance.

Disclaimer: This content has been sourced and edited from News 18 hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.