How to acquire loans responsibly – Bank of Ghana issues guidelines on how to avoid debt trap

has released a notice emphasizing the need for responsible borrowing practices among the general public. The notice highlights key issues that potential borrowers should consider before acquiring loans from banks and specialized deposit-taking institutions.

Firstly, potential borrowers should critically assess their capacity for the loan and their repayment capabilities before obtaining a loan facility. Borrowers are advised not to rush to acquire loans and instead compare offers from multiple lenders before deciding on the best deal.

Prior to signing a Loan Agreement, lenders are required to give potential borrowers a Pre-agreement Truth in Lending statement that summarizes the terms and conditions associated with the loan.

Information on the Pre-agreement Truth in Lending statement should include the interest rate of the credit facility, annual percentage rate (APR), other fees and charges, repayment schedule, penal charges or late payment penalties, and any security deposits or savings required as a condition to acquire the loan.

When making a decision to accept a loan offer, customers should look out for the APR, which represents the total cost to be paid to the lender each year for the loan, expressed as a percentage. Potential borrowers may compare the APR of their financial institution with those of other lenders in making the decision on where to apply for their loan.

Before signing any Loan Agreement, potential borrowers should read and ensure that they understand all the terms and conditions, and seek professional advice if needed. Charges that are not disclosed to the borrower in the Loan Agreement will be considered null and void, and borrowers shall be due a refund of all such charges paid.

If borrowers desire to pay off a loan earlier than scheduled, the lender should provide the full outstanding amount to pay and allow 20 working days from the date of receipt of the written request to effect full repayment. Borrowers may be charged an early settlement penalty fee, which should not exceed 0.25% of the principal amount of the loan.

After signing the Loan Agreement and obtaining the facility, borrowers should adhere to the agreed terms and conditions, including the repayment of the facility. The lender may be contacted where necessary to discuss any repayment challenges.

Borrowers are advised to always obtain a copy of the Loan Agreement, duly signed by them (borrower) and authorized representative(s) of the Lender, for their records.

This notice is part of Bank of Ghana's mandate to promote transparency and effective disclosure practices in the financial sector.

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