loan agreement is a document
in which a lender sets out the
terms and conditions under
which it is pr epared to make a loan
available to a borr ower.
The main purpose of the loan agreement is to define
what the parties involved are agreeing to, what responsibilities
each party has and for how long the loan
agreement will last.
Herewith an explanation of the essential terms and conditions of a loan agreement:
(i) A loan agreement must indicate the amount of the loan, the amount of interest and other charges added to the loan, which will make up the total debt. The loan agreement should stipulate how the amount should be repaid, i.e. once-off in one amount or in equal monthly instalments if the loan is serviced over an agreed number of months.
(ii)If the loan is paid off late, the loan is considered in default. In such circumstances a lender may require a borrower to sign a written Consent to Judgment. In this regard it is important for borrowers to know that it is illegal for such forms to be signed by a borrower at the time of entering into the loan agreement. It therefore follows that the signing of consent to judgment or consent to an emoluments attachment order prior to the borrower defaulting should stop it. A Consent to Judgment form is signed by the borrower whereby the borrower agrees that he or she is indebted to the lender. The Court will then issue a judgment on the basis as agreed on by the lender and the borrower. Once the Court gives the Judgment, the borrower can sign a written consent to an Emoluments Attachment Order. An Emoluments Attachment Order is a court order whereby the judgment creditor (lender) is able to attach part of the salary of the judgment debtor (borrower). Once an Emoluments Attachment Order has been granted, the employer of the judgment debtor is obliged to pay a certain portion of the judgment debtor’s salary to the judgment creditor.
(iii) Cooling-off period allows the borrower to terminate the loan agreement within a period of three (3) business days after the signing of the agreement and, if the loan amount has been paid out, simultaneously to repay the loan amount received, to the lender. If the borrower terminates the loan agreement within the cooling-off period, the borrower is only obliged to repay the interest for the number of days that the loan was availed of and not interest for the full period of the loan agreeme
(iv) A micro lender may not retain the Bank Card and Personal Identification Number (PIN) of a borrower in respect of a loan availed of.
(v) The lender must, before the conclusion of a micro loan agreement –
(a)Explain to the borrower in a language which the borrower understands (if necessary with the assistance of an interpreter) the essential terms of the loan agreement so as to ensure that the meaning and consequences of the agreement are understood;
(b)Allow the borrower an opportunity to read the agreement, or have it read to the borrower in the case where the borrower is illiterate; and
(c)Provide the borrower with a copy of the signed loan agreement before or at the time of advancing the loan amount and, if applicable, a copy of the insurance contract pertaining to the loan transaction.
(vi) A borrower has the right to lodge a complaint with NAMFISA if a lender has treated him or her unfairly. A Complaint Intake Form should be completed by the borrower and submitted to NAMFISA for further investigation. In conclusion: It is important for a borrower to honour the terms and conditions of the loan agreement. If a borrower is unable to service a loan on the basis as agreed on with the lender, the lender should be contacted immediately and new arrangements made for the repayment of the loan. It is important for the borrower not to remain quiet and hope for the debt to go away; it will not disappear and will only cause bigger problems and expensive legal costs to the borrower in future. Do contact the lender to explain your current difficulties, and negotiate new repayment terms that you can afford. Open communication is always better than avoidance and can help protect your financial future.
Herewith an explanation of the essential terms and conditions of a loan agreement:
(i) A loan agreement must indicate the amount of the loan, the amount of interest and other charges added to the loan, which will make up the total debt. The loan agreement should stipulate how the amount should be repaid, i.e. once-off in one amount or in equal monthly instalments if the loan is serviced over an agreed number of months.
(ii)If the loan is paid off late, the loan is considered in default. In such circumstances a lender may require a borrower to sign a written Consent to Judgment. In this regard it is important for borrowers to know that it is illegal for such forms to be signed by a borrower at the time of entering into the loan agreement. It therefore follows that the signing of consent to judgment or consent to an emoluments attachment order prior to the borrower defaulting should stop it. A Consent to Judgment form is signed by the borrower whereby the borrower agrees that he or she is indebted to the lender. The Court will then issue a judgment on the basis as agreed on by the lender and the borrower. Once the Court gives the Judgment, the borrower can sign a written consent to an Emoluments Attachment Order. An Emoluments Attachment Order is a court order whereby the judgment creditor (lender) is able to attach part of the salary of the judgment debtor (borrower). Once an Emoluments Attachment Order has been granted, the employer of the judgment debtor is obliged to pay a certain portion of the judgment debtor’s salary to the judgment creditor.
(iii) Cooling-off period allows the borrower to terminate the loan agreement within a period of three (3) business days after the signing of the agreement and, if the loan amount has been paid out, simultaneously to repay the loan amount received, to the lender. If the borrower terminates the loan agreement within the cooling-off period, the borrower is only obliged to repay the interest for the number of days that the loan was availed of and not interest for the full period of the loan agreeme
(iv) A micro lender may not retain the Bank Card and Personal Identification Number (PIN) of a borrower in respect of a loan availed of.
(v) The lender must, before the conclusion of a micro loan agreement –
(a)Explain to the borrower in a language which the borrower understands (if necessary with the assistance of an interpreter) the essential terms of the loan agreement so as to ensure that the meaning and consequences of the agreement are understood;
(b)Allow the borrower an opportunity to read the agreement, or have it read to the borrower in the case where the borrower is illiterate; and
(c)Provide the borrower with a copy of the signed loan agreement before or at the time of advancing the loan amount and, if applicable, a copy of the insurance contract pertaining to the loan transaction.
(vi) A borrower has the right to lodge a complaint with NAMFISA if a lender has treated him or her unfairly. A Complaint Intake Form should be completed by the borrower and submitted to NAMFISA for further investigation. In conclusion: It is important for a borrower to honour the terms and conditions of the loan agreement. If a borrower is unable to service a loan on the basis as agreed on with the lender, the lender should be contacted immediately and new arrangements made for the repayment of the loan. It is important for the borrower not to remain quiet and hope for the debt to go away; it will not disappear and will only cause bigger problems and expensive legal costs to the borrower in future. Do contact the lender to explain your current difficulties, and negotiate new repayment terms that you can afford. Open communication is always better than avoidance and can help protect your financial future.
Fair Lending Requirements
a lender is required to:
In conclusion:
It is important for a borrower to honour the terms and conditions of the loan agreement. If a borrower is unable to service a loan on the basis as agreed on with the lender, the lender should be contacted immediately and new arrangements made for the repayment of the loan. It is important for the borrower not to remain quiet and hope for the debt to go away; it will not disappear and will only cause bigger problems and expensive legal costs to the borrower in future. Do contact the lender to explain your current difficulties and to make new.
It is important for a borrower to honour the terms and conditions of the loan agreement. If a borrower is unable to service a loan on the basis as agreed on with the lender, the lender should be contacted immediately and new arrangements made for the repayment of the loan. It is important for the borrower not to remain quiet and hope for the debt to go away; it will not disappear and will only cause bigger problems and expensive legal costs to the borrower in future. Do contact the lender to explain your current difficulties and to make new.