The Central Bank has urged customers of banks and specialized deposit-taking institutions to keenly look out for interest rates when deciding to accept a loan offer, which is known as the Annual Percentage Rate (APR).
The APR represents the total cost to be paid to the lender annually for the loan facility which is expressed as a percentage and provides a broader measure of the cost that a borrower pays for taking a loan.
It further reflects not only the interest rate but also the other charges that borrowers have to pay for the loan.
According to the Central Bank, borrowers must critically assess their capacity for the loan, particularly their repayment capabilities before obtaining or accepting a loan facility.
The BoG made this known in a statement issued to outline key issues with regards to loan acquisition and repayment responsibilities and obligations of customers.
“You may compare the APR of your financial institution with those of other lenders in making the decision on where to apply for your loan. Take note of all the fees and charges associated with the loan, and these shall be disclosed in the Loan Agreement,” it advised.
The Central Bank further called on borrowers to seek clarification from the lender in any language of their choice to gain the needed understanding of the loan product.
“Prior to signing any Loan Agreement, please read and ensure that you understand all the terms and conditions, and seek professional advice if you need it,” the BoG noted.
Meanwhile, the Central Bank has also advised borrowers not to rush in their bid to acquire loans. It therefore noted that borrowers can compare offers from multiple lenders before deciding on the best possible deal.
“Prior to the signing of a Loan Agreement, lenders are required to give potential borrowers a ‘Pre-agreement Truth’ in Lending statement (similar to proforma invoice), that summarizes the terms and conditions associated with the loan,” the statement added.
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The Central Bank has called on borrowers to seek clarification from the lender