If you stop to read the paperwork before signing anything – congratulations. If you don’t, beware. Your signature could commit you to paying off the debt you really can’t afford. Financially inexperienced young adults often make these mistakes. It is important to read a credit agreement carefully before signing. To grasp the financial terms often used in these agreements, read our first article, You need to read your credit agreement – Part 1.
Credit agreements: what you sign up to do
One of the great benefits of dealing with a reputable credit provider is that everything is in writing so it protects both parties. It means that nothing about your loan should come as a surprise.
When you sign a credit agreement, you enter into a legal contract. It explains exactly what you agree on, namely:
- When and how payments will be made, how many payments you will have to make, and the date of the first and last payments.
- All insurance information (monthly premium, when the policy will pay out, fees or commission allowed to credit providers).
- How and how often you will receive a statement.
- When and how much default administration costs will be charged.
- Your right to cancel the agreement and the conditions to do so
- When and how you can pay off your loan earlier than the agreement states.
- The address where documents can be delivered to you.
- Penalty interest on arrear amounts.
- A statement that allows you to choose to not be on lists for telemarketing campaigns or types of mass marketing.
- Your right to apply for debt counselling if you can’t make payments.
- The rights of the credit provider, such as the the right to enforce the credit agreement.
- Information on how your information is reported to credit bureaus.
You have to know and agree with, everything in the document before you sign it. You should ask the agent you are dealing to explain anything in the agreement that you don’t understand.
The credit agreement gives you important rights and obligations. Here are 3 of them:
- Payment obligation: Once you have signed the agreement, you have an obligation to make payments. You can pay with cash, electronic funds transfer (EFT) or a debit order. Select the payment option that is best for you.
- Updating your information: You must let your credit provider know immediately if your personal information changes. Check your statements regularly and make sure your details are correct.
- Your right to a statement: You can request a statement that shows your current balance at any time. The statement must also show all amounts debited or credited, any amounts that are overdue and currently payable.