As a borrower, it pays to know your rights – and don’t be afraid to exercise them!
It can all seem a little intimidating when you apply for a loan, and it seems like the lender is putting a lot of conditions on you as the borrower. But what are your rights? Borrowers are heavily protected by state and federal law, and you can expect your lender to keep up their end of the bargain too. You have:
The right to know what you’re in for
The lender must provide you with a very detailed contract which outlines all of the terms and conditions of your loan in clear language. You should take the time to understand all of your obligations, fees and charges and make sure the loan amount details are all correct.
The right to know your interest rate
Your lender is required to communicate interest rate changes to you in advance – either directly, or by putting an advertisement in a major newspaper.
The right to know your repayment amount
The lender must provide you with written notice at least 20 days before your interest rate is due to increase.
The right to a copy of your loan statement
A loan statement must be provided to you every six months. You have the right to dispute any transactions that you don’t feel are correct or justified.
The right to pay out your loan at any time
There may be some fees involved, but you do have the right to pay your loan out at any time. Accordingly, you also have the right to know your payout figure, which your lender must provide to you within 7 days of receiving a written request.
The right to terminate your contract before the funds are drawn down
You have the right to pull out of the transaction if the funds have not yet been drawn down for settlement to take place.
The right to get assistance in times of financial hardship
There is legislation in place to protect you if you experience financially tough times. It’s worth investigating the relevant options so that you are ready for the unexpected.
But, you would remember from childhood that more rights usually equals greater responsibilities. There are a few obligations that you must keep to your lender as well:
Provide truthful, factual information when you apply.
– Make all of the repayments on the due date.
– Keep the property in good condition and don’t make any big alterations without getting permission from your lender.
– Take out insurance for the full replacement value of the buildings/structures and keep the insurance policy paid and current.
– Don’t sell, rent, or mortgage the property without your lender’s permission.