7 Essential Rights To Know As Borrowers. How Many Do You Know?
When looking for any financial aid, it’s crucial to always abide by the borrower’s rights and responsibilities outlined by the federal regulations. Beware of all the points discussed below before you accept any loan funding.
Why is it Important to Know the Rights of Borrowers?
- To avoid scammers – the current financial market is filled with scammers and fraudsters who use their witty tricks to lure borrowers. Understanding your borrower’s rights will help you from falling into their traps.
- Helps you get the best loan which meets your specific needs – getting the right information before receiving the loan helps you to make an informed decision.
- Enhances fair lending – the federal law prohibits discriminating against borrowers depending on their religion, marital status, age, race, nationality and much more.
Tip Understanding these rights helps the law to identify the organizations that discriminate against borrowers.
What Are The Essential Rights Regarding The Case?
Regardless of the method you use when borrowing funds from a licensed financial institution, it’s crucial for you to understand your rights and obligations as well. Discussed below are the seven essential rights every borrower should know:
- 1. Choosing
Every borrower has the right to choose the best loan that fits their specific needs. It means that the lender should not force you to get a particular type of loan, that you are not interested. The responsibility of the lender is to give the guidelines, the requirements of each credit and then leave the decision upon you. You also have the right to fail to sign a loan agreement that you have not understood well.
- 2. Disclosure
When you sign up to any credit deal, the lender must give you accurate information of the teams and condition of the loan as well how much the loan will cost you. The disclosure statement must be made in writing and given to you before signing the actual contract. You must be told the following in the disclosure statement: the exact amount of your total installments, any additional charges (insurance charges, any credit establishment fees, interest.), and what action will be taken if you default?
- 3. Cancellation
As a borrower, you have a cooling period of 3 working days, after getting the written disclosure statement. You can cancel your contract during this period. However, if your credit deal involved hire purchase and you have already accepted the procession of the goods bought using the borrowed amount, you must continue purchasing the products even after you have canceled the loan.
- 4. Fees
All loan establishment costs must be directly linked to the expenses involved. Also, the third party (if the lender needs a credit check or valuation) must be directly passed on. If you decide to repay the loan at an earlier date other than the agreed, the lender will charge you only an additional fee which reflects the loss incurred by the lender. The damage of the unearned interest should, however, be minimal since the lender can give loans to other people. However, there is no set limit on the actual rate of interest which the lender can charge.
- 5. Hardship
As a borrower, you have the right to ask your lender to change the terms and condition of your contract if you fall into emergency/unforeseen hardships. The hardship must only be caused by catastrophic or unexpected events such as injury, redundancy or illness. You must involve your lender immediately (not later than two months) after getting the misfortune so that the lender can postpone your next payment or extend the loan repayment period. If you fail to honor the new agreement you make with your lender after the hardship application, the lender might repossess the assets bought using the loan.
- 6. Communication
You have the right to stay informed of any changes that take place after getting the role. For instance, if the lender sells your loan to another lender, you must be notified on the progress, sale results and the mode of repayment to the new organization. Both the new and old organization must each inform you of the sale, the address, name, and contact of the new organization. Everything should be done transparently for your sake.
- 7. Grace Period
Every borrower has the right to a grace period before they start to make the loan repayment installments. The exact grace period should always be indicated on the agreement note, and should not be changed by the lender without proper communication. The grace period varies between different lenders and borrowers too. For instance, the grace period of the student begins after leaving college.
What To Do If Your Rights Are Violated?
If you believe that you have mistreated by tour finance broker or the lender, or that your finance broker and lender have breached their professional obligation or duty on you, contact them immediately and complain. Make the complaint in writing then pass it to them through formal procedures.
If you are still unhappy with the response you receive, take you to complain to a legal counsel. Find a good lawyer to represent you then follow all the procedures for presenting the case to a court. Make sure that you inform your lender of your decision.
Lending is a critical process which involves good cooperation between the lender and the borrower. While the lender has to adhere to the lending responsibilities, the borrower must also carry out the borrower responsibilities which include making payments according to the agreement without delay.