The main document that governs the payday loan process is a payday loan agreement . Its conditions must be perfectly fulfilled by all parties to the transaction, both the borrower and the lender. For each violation provides for the application of penalties, up to the early repayment of the payday loan.
But, if you look at the situation objectively, then the debtor has more responsibilities than the bank. Therefore, the borrower needs to be very well oriented in the text of the document, which he signs and undertakes to carry out within a specific period.
What is a payday loan agreement
Banks must draw up consumer credit agreements in accordance with Federal Law of 12/21/2013 N 353-ФЗ “ On consumer credit (payday loan) ”.
A payday loan agreement is a document that is concluded between a lender and a borrower. In accordance with the terms of which, the first undertakes to provide money to the client, and the second must return them in due time and pay a certain amount for using the money.
Considering that payday loans are granted with the obligatory observance of the basic principles of crediting: repayment, payment, urgency, targeted use and security. All of them are reflected in the text of the agreement between the bank and the debtor.
It should be noted that the last two principles are not used in non-target consumer payday loans without collateral, the rest can be seen in all credit agreements:
- repayment – means the term of the payday loan agreement, meaning a specific date, before which the client must fulfill all obligations to the bank.
- Urgency – provides for the use of credit money for a certain period.
- Payment is the amount of the interest rate and additional fees that the borrower agrees to pay for using the lender’s money.
In accordance with the Civil Code of the Russian Federation, a credit agreement must be drawn up in writing, otherwise it is considered null and void.
The number of copies of the agreement at the conclusion of the contract is usually two, for each of the parties to the transaction.
What is the payday loan agreement
A standard payday loan agreement between a bank and an individual for the issuance of a consumer payday loan consists of the following points:
- details of the borrower and the lender – a complete description of the parties to the transaction;
- basic concepts – contains a transcript of all the concepts that will be used in the text of the document;
- subject of the contract – the amount, term of the payday loan, interest rate, purpose of lending;
- issuance and repayment – describes the mechanism for obtaining a payday loan, as well as the date by which the borrower must carry out a monthly repayment of interest and the body of the payday loan;
- procedure for early repayment – describes the mechanism for the implementation of early repayment;
- additional services and their cost – fees for opening an account, crediting payments, insurance, etc .;
- rights and obligations of the bank and the borrower – what is required to do and what can not be done by the parties to the transaction;
- fines and consequences for breach of contract terms – specifies the amount and rules for the accrual of penalties, as well as the mechanism of early repayment in case of breach of contract terms
- amending procedure – how the borrower or lender can make changes to the text of the main agreement;
- responsibility of the bank and the borrower;
- repayment schedule;
- other conditions.
The procedure for displaying the contents of the payday loan agreement varies depending on the lender. But no matter how it was there, in order to avoid problems with repayment in the future, it is necessary to study it very carefully and absolutely all the points, and not just those that the credit manager will point out to the client. After all, the latter can:
- poor orientation in the text of the document;
- Do not want to focus the attention of the potential borrower on the “slippery” moments that can scare the client.
Essential terms of the contract
Part of the terms of the payday loan agreement is essential, and some optional. The former are of great importance, because without them the agreement is invalid and does not provide for legal consequences.
How repeats Art. 432 of the Civil Code of the Russian Federation – the contract is considered concluded if the parties have negotiated and agreed to absolutely all essential conditions. Otherwise, the agreement is considered not valid.
The essential terms of the payday loan agreement are:
- parties to the agreement: the lender and the borrower;
- payday loan amount and currency;
- the purpose of the payday loan (it may simply be indicated for consumer purposes);
- credit term;
- payday loan security;
- terms of issue and repayment;
- fee for using money.
What you should pay attention in the contract
Let’s face it – not every borrower carefully examines the content of the payday loan agreement before signing. Usually at this moment a lot of thoughts “swarm” in the mind of people how it is more rational to spend the money received, what to buy with them, and simply do not want to reread many pages of incomprehensible dry text.
Moreover, the manager indicated all the conditions of the payday loan agreement of interest: the amount, term, interest rate, amount of the monthly payment.
And this is the main mistake of almost all borrowers. After all, if everything were so simple, then why waste paper on many pages of nothing insignificant text. What is necessary first of all to pay attention to the potential borrower:
Credit amount
It depends on the monthly income and the cost of goods or services (if the payday loan is targeted). Therefore, it is not always the client who is approved of the size of the payday loan or the limit to the card that he expects. If the amount is not satisfied, you can refuse to sign the contract and look for another lender, but you can agree.
Maturity
This is the date before which the customer must repay the payday loan. Usually it is indicated at the beginning of the contract. If after this number the debt is not repaid, then there is a delay and the bank may impose fines and penalties.
Monthly repayment period
This is a temporary period during which the borrower must make periodic payments. For example, a monthly number from 1 to 15. If it does not fit within the stipulated time period, then there is a delay and a penalty begins to be incurred. Usually, monthly repayment periods are contained in the payment schedule.
Interest rate
This is a payday loan payment that the borrower undertakes to bear for using the lender’s money. It can be both floating and fixed.
The first means that it can change under the influence of certain factors. What exactly must be specified in the contract. The second is stable until the end of the payday loan term.
To date, floating interest rates on consumer payday loans are practically not used. By the way, the bank cannot unilaterally change the interest rate. On raising or lowering the fee the borrower must be notified. Usually the bank sends letters or informs by phone.
Banks are required to specify in the payday loan agreement the effective interest rate – that is, the full cost of the payday loan, taking into account all fees. The effective rate will differ from the nominal rate that banks indicate in their payday loan offers.
The law obliges to place the full cost of the payday loan (PSV) on the first page in a square frame, the area of which must be at least 5% of the page. The frame should be in the upper right corner. The letters indicating the size of the PSV should be black on a white background, readable font of the maximum size used on this page.
Fines
The most interesting part of the payday loan agreement. Here it is indicated what punishment the borrower will incur for non-fulfillment of certain conditions. Standard sanctions applied by the bank:
- charge of late fees;
- increasing the interest rate by several points for the absence of valid insurance contracts;
- a fine or demand for early repayment of the payday loan for making capital changes in the collateral or renting it out without the written consent of the bank.
In addition, the bank may apply penalties if it finds out that the borrower has not provided information about significant changes in his life, for example, a change of job, place of residence, marital status, etc.
This section also describes the procedure for notifying the borrower of early repayment of a payday loan in the event of default.
Rights and obligations of the parties
Here he signs in detail what a borrower should do. Usually, the bank requires the client to report a job loss, payday loan applications to other banks, travel abroad and other events that may have a big impact on the quality of debt service.
In turn, the lender provides an opportunity for the borrower to repay the payday loan ahead of schedule, apply for restructuring, etc.
Payment schedule and tariffs
These are important additions to the payday loan agreement, the borrower must receive them from the lender. By the way, tariffs are very relevant for credit cards. After all, the parameters that accompany payments by payment cards are much more than for consumer credit in cash.
The tariffs also indicate the fee for additional services that the bank provides to the client, for example, opening an account, issuing a card, insurance. All these are additional fees that the borrower doesn’t pay much attention to at the time of signing.
But in the future, when, instead of repaying a payday loan, he will have to pay them, you can be very sorry. Indeed, many banks increase the profitability of a credit operation with the help of additional fees and payments, although the interest rate itself is not very large.
To avoid such a situation, a potential client at the time of applying for a payday loan the bank manager is obliged to provide a calculation of the real interest rate on the payday loan. This calculation should include all expenses that the borrower will incur when servicing the debt:
- payment of interest and the payday loan amount;
- fees for opening an account, escorting a payday loan, cash withdrawals, etc .;
- insurance payments;
- notary fees;
- cost of expert assessment;
- other payments to third parties.
All these expenses in aggregate show how much the payday loan will cost the client if he will serve it for the entire term (without early repayment). For card payday loans, a similar calculation is made, but taking into account the fact that the client uses the entire credit limit and does not take into account the actions of the grace period. The calculation of the real interest rate helps to determine where it is more profitable to get a payday loan, since it includes all the costs accompanying debt repayment.
In addition to this document, the client is provided with full information about the payday loan: the amount, rate, commissions, tariffs, the availability and amount of the down payment, collateral, methods of repayment.
All this information is provided for by Article 10 of the Federal Law “On Consumer Rights Protection” and Art. 30 of the Federal Law “On Banks and Banking”. The calculation of the real interest rate and the full cost of the payday loan are printed out in two copies, signed by the representative of the lender and the client. Without these documents, the subsequent payday loan agreement can be disputed.
The order of the changes
At the conclusion of the payday loan agreement, few people pay attention to this point. After all, no one plans to change something until the final repayment. And in vain, usually the banks for changing the payday loan agreement at the initiative of the borrower take a commission. The most frequent changes that customers are applying are a downward revision of the payment schedule, a change in the subject of collateral or guarantors.
Changes are made by additional agreements and if they affect the material conditions, the bank manager is obliged to the borrower to again provide the calculation of the real interest rate and the full cost of the payday loan. Without this, the court can recognize changes as insignificant.
Early repayment
To date, no early repayment fee is available. However, banks are not profitable if the client closes the payday loan ahead of time. After all, thus, their interest income decreases. Therefore, in various ways they delay this moment.
Often, a whole section is devoted to the procedure of terminating a payday loan agreement . It clearly describes the time frame – for how many days the borrower must notify the lender in writing of his desire to fully or partially repay the payday loan, and how he can do it.
In other words, it talks about the early repayment mechanism. Plus, some banks provide several options in the case of partial early repayment, one of which should be chosen by the client:
- postponement of final repayment;
- reduced monthly payment.
Payday loan agreement
A payday loan agreement is a document without which no payday loan is issued. It is important for both the borrower and the lender. The payday loan agreement will be invoked by the parties in court if the need arises.
But in order for the borrower not to have problems with the repayment of debt and the search for equity in the future, he must carefully examine the contract before signing. To succumb to the manager’s persuasion that “the document is standard and everything is clear” is not worth it.
It is better to spend more time reading the contract than to be surprised at the appearance of additional expenses and obligations.
For example, very often, many customers who do not read the contract before signing are faced with are the presence of unnecessary paid services: insurance, issuing cards, opening an account, etc. They increase the cost of a payday loan, reducing the attractiveness of its original conditions. But they could have been abandoned, or they could go to another bank, where the costs would be less.
It is impossible to single out the most important thing in a payday loan agreement. In this document, all you need to pay attention. It should be noted that rarely which bank agrees to the client’s requests to take the contract for familiarization home. Usually you have to read it just before signing, when the time and the queue of other customers is running out.
Partially to avoid the hassles associated with the emergence of additional commissions and payments can be through a detailed study of the calculation of the real interest rate and the full cost of the payday loan, which must be indicated in the contract. They show all the costs borne by the borrower with standard payday loan servicing.
Therefore, before applying for a payday loan, it is necessary to monitor the conditions in several banks in order to compare where it is more profitable to borrow. And by the way, in the end it may turn out that the lending program, where the lowest rate is, is not very profitable, due to additional fees and payments.