How to Review a Loan Agreement
Before signing an electronic loan document, thorough review is essential. A loan agreement is a legally binding contract enforceable in court. Federal regulations require lenders to provide standardized disclosures to help you understand every commitment.
Understanding the Federal TILA Box
Under the Truth in Lending Act (TILA), all consumer lenders must feature a prominent disclosure box summarizing the core financial terms:
The cost of your credit expressed as a yearly rate, incorporating interest and upfront finance charges.
The total dollar amount you will pay to borrow the money, beyond the principal.
The actual amount of cash provided to you or credited to your account.
The cumulative sum of principal and finance charges paid after all scheduled payments are made.
Crucial Contract Clauses to Inspect
- Repayment Schedule: Verify exact calendar due dates and payment amounts. Ensure dates correspond with your payroll schedule.
- ACH Authorization: Read how automatic bank debits are scheduled and how you may revoke electronic authorization if necessary.
- Prepayment Penalties: Ensure there are no penalty fees for paying off the loan earlier than the full term.
- Default & Late Charges: Note the fee amount and allowable grace period before late penalties trigger.
Next Step
Review our comprehensive breakdown of Rates and Fees or explore Responsible Borrowing Tips.