How to read a loan agreement before you sign
Goodname Finance
Six things to find in any loan agreement, and what to ask when something is unclear.
A loan agreement is long because it has to be exact. You do not need to read it like a lawyer, but you should find these six things before you sign.
1. The amount you receive and the amount you repay
These are different. The difference is the cost of the loan. Both should be written in shillings.
2. The interest
Ask how it is charged and over what period. In Uganda, a money lender may not charge more than 2.8% a month. If the figure is quoted per year or as a flat total, ask for the monthly equivalent.
3. Every fee
Look for processing, insurance and onboarding fees. Each should be named with an amount. If a fee is not written down, ask whether it applies.
4. The instalments
You should see how many, how much and on which dates. Check that the dates suit when you are paid.
5. Late payment
Find what happens if you pay late, including any late interest, and who to call before a due date if you expect to miss one.
6. Security
If guarantors or collateral are named, check that you understand what each is asked to do and when collateral is released.
If something is unclear
Ask the officer to explain it in plain words and to point to the line in the agreement. Do not sign until you understand it. You can also ask us to call you through the contact page.