When you take on a loan you actually enter into a legally binding agreement with the lender. Therefore, there are lots of implied meanings as well as legal responsibilities that automatically comes on you when you take a loan. Similarly the creditor also has a few legal rights to protect their money loaned out to you.
As for you the legal implications and responsibilities are:
- You will receive the money at the earliest only when you agree to repay the principal amount along with an extra amount as interest
- You will have to abide by the lending policy and the rate of interest fixed on your loan amount
- You will also have to repay the amount as per the terms agreed upon and
- You will have to repay the entire amount within the stipulated time as agreed.
As for the lender, whether it is a brock or mortar constructed bank or any other online resources such as https://www.libertylending.com/, there are a few legal rights vested as well. These are:
- The lender may only offer you the loan if you qualify for it and meet all the loan requirements as per their lending policy
- The lender can even reduce the loan amount you want depending on your credit
- The lender has the right to charge you interest on the entire amount loaned to you
- This rate of interest can be charged at a fixed or a floating rate as per the discretion of the lender
- The lender has all the rights to collect their dues if you fall behind the repayment schedule
- They can even give your account to collections if need be
- They can sue you for non-payment or not responding to their calls
- They may accept or deny your request for debt settlement if you fail to repay the amount you owe and
- They even have the right to confiscate your asset or garnish your wages in case of secured loans if you lose the lawsuit against them.
You may notice that the list for the lenders is pretty big and on closer look you will find that most of their rights may go against you in unfavorable conditions.
However, this does not mean that the lenders can sit on top of you if you fail to repay the loan you have taken out. According to the Fair Debt Collection Practices Act or FDCPA of the Federal Trade Commission there are few specific practices that are prohibited to perform by the creditors and especially the debt collection agencies. Some of these prohibitions include:
- No creditor or debt collection agency can follow anything that is against the law or hurts your privacy, security or mental and physical condition.
- They cannot hurt you, harm you, or threat you for dire consequences for not being able to repay them.
- They cannot call you up at odd hours or any place that you do not want them to such as your office.
- They cannot even call you if you asked them not to or have made it clear that you case is with the debt attorney and you are contemplating on repaying as soon as possible.
- They cannot even pose as lawyers or law enforcement or use their name for their collection practices.
All these will protect your rights but there are some severe consequences that you should also know if you do not repay the loan you have taken out from a lender.
Other legal aspects to know
There are a few other legal aspects to know as well when you take out a loan which will help you to avoid delays as well as some of the common problems. These are:
Legal structure: It is your legal structure that will determine the process that will be followed to grant you a loan. It will also include other factors such as:
- Who will authorize the transaction
- How the documentation will be signed and
- What are the necessary steps you should take?
Moreover, if you are taking out a loan on behalf of a registered charity then you will be required to get a written financial advice from the Charity Commission especially if you wish to take a loan secured by property. In this case you will also need to ensure that:
- The loan is required and will be used for any charity purpose
- The terms and conditions of the loan are reasonable and
- The charity has enough ability and resources to repay the loan.
For any change in the legal status, it should be informed to the bank as it is essential that you make that change before you take out the loan.
Apart from that you must also check out the governing documents as all may not give you the right to borrow money from the bank. This will enable you to know as to when you should pledge your assets as collateral security for the loan.
This legal aspect may not be very clear always and therefore you are requested to take help for a professional. This is because you may need some specific power to pledge assets to get a loan especially if you are taking the loan in the capacity of an unincorporated organization as you may have the power to borrow money but may not have the power to pledge an asset.
If you are taking out a loan to buy a land or property you will have to consider the following legal aspects before you apply for it. These are:
- The location and suitability of the property to have an increased value
- The price of the property is fair as compared with other similar properties on the market
- The fact that you can afford to purchase it and repay the loan on reasonable terms and
- The fact that you understand the legal obligations and implications related to buying a land or a home on loan.
Remember, taking out a loan is a personal liability and you are legally bound to abide by the terms and conditions or face legal consequences. There, look or think before you leap!