Loan Agreement – How To Read Your Contract

A loan agreement is sent to you by a lender when they make you an offer. Moreover, this legally binding contract outlines all the terms and charges associated with your loan. It is, as a result, important you read and understand your contract before approval.

Monzi is a lender-finding service. We do not offer financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What is a loan agreement?

A loan agreement is simply the contract between a borrower and a lender. Specifically, the loan contract records the mutual promises made by each side. In addition, the contract contains, among other things, information regarding fees, repayment terms and interest.

Lenders offering personal loans may send you an agreement if you use Monzi’s lender-finder service. To give you a better idea, we’ll explore what you may expect to be included in your credit contract.

What is included in my personal loan agreement?

Lenders first assess your application according to their own policies and guidelines. Moreover, lenders send through a digital loan contract upon approval. Here’s what you can, in short, expect to find in your agreement:

  • Borrower’s details: information about the loanee, like their name, address and contact number.
  • Loan details: include things like the amount borrowed, interest rate, upfront fees, first and last repayment dates etc.
  • Fees & charges: All the potential fees and charges associated with your contract.
  • Security details: includes chassis number of the vehicle used as security etc.

What fees does my agreement include?

Your contract will outline all the potential fees and charges associated with your loan. There are, however, a number of different fees you may encounter, depending on the loan product.

We’ll explain a few examples of the fees you might see included in your contract.

  • Application fee. Also known as an establishment fee, this charge covers the lender for setting the loan up. Depending on your loan, you may pay a percentage of the principal or a flat fee.
  • Missed payment fee. If the lender attempts to direct debit a repayment but the transaction fails, you will be charged a fee.
  • PPSR check. Lenders check the Personal Property Security Register if you apply for a secured loan. Moreover, there is often a fee charged to the lender, who may pass it on to the borrower.
  • Repossession fees. If you fail on a secured loan, the asset you used as security may be repossessed. If so, lenders may pass the cost of repossession onto the consumer.

Keep in mind, your contract may include additional fees and charges outside of what is listed above.

What do I do if I don’t understand my agreement?

Get in contact with your lender before signing if you are unsure about anything in your contract. After all, your lender will be able to walk you through any and all questions you may have.

Am I able to cancel my contract?

If a lender offers you a contract, you are under no obligation to approve it. If, however, you approve your contract and then decide to change your mind, you may find yourself in a spot of bother.

This is why it is paramount you read through your contract carefully before approving it. If there is anything you do not understand, do not sign your contract.

You may not be able to get out of your contract once it is approved.

How do I write a loan agreement?

If you are considering writing a loan agreement for friends or family members, you may be able to access templates online.

These basic templates include:

  • Borrower’s details – name, address etc.
  • Lender’s details
  • Principal amount
  • Information about the interest charged.

Loan agreement man signing contract

What happens if I fail on my unsecured loan agreement?

The recourse for failing on your loan will depend on the loan product you take out.

If you fail to repay an unsecured loan, the lender may pass your file on to debt collectors. In addition, Australian Law allows debt collectors to call you over the phone, reach out to you on social media or even meet face-to-face.

There are, however, rules protecting consumers during the debt collection process. For example, debt collectors can only call you between 7:30 am to 9 pm Monday to Friday. In addition, debt collectors must not call you more than 3 times a week or 10 times in the month.

Head to the MoneySmart article on dealing with debt collectors for more information.

Failing to pay your secured loan

If you cannot repay your secured loan or reach a resolution, your lender is legally able to repossess the asset you used as security. By selling your asset, lenders can recover some of the losses they incurred on the failed loan.

There is, however, legislation in place to protect you in the event of repossession.

For example, lenders can only repossess your vehicle if:

  • you owe more than $10,000; or
  • owe more than 25% of your loan.

Furthermore, the repression process can only begin once:

  • your loan is in arrears
  • the lender sends a 30 day notice to settle the debt
  • you’ve failed to settle your debt, reached an agreement or applied for repossession to be postponed.

Before you sign your loan agreement

Before you approve your contract, make sure you have ticked off the below list.

  1. Ensure you have read through your entire contract thoroughly. In particular, make sure you know what you are agreeing to, as well as what you are expected to do under the contract.
  2. Get a copy of the contract for your own records.
  3. Do not approve your contract if there is anything you are unsure about. Get in contact with your lender and they will be able to walk you through it.

Can Monzi explain what’s in my loan agreement?

Unfortunately, no. This is because we are a lender-finder service, not actually lenders. Therefore, when you apply on our site, we aim to match you with a credit provider from within our network.

Moreover, as each of the lenders in our network is a separate company, we cannot speak on their behalf. Therefore, you will need to get in contact with your lender for any questions regarding your contract.

For general information about our lender-finder service, feel free to reach out to our customer service team at hello@monzi.com.au.

What loans can Monzi find?

Monzi’s lender-finder service may be able to match you with a lender offering personal loans. Moreover, these personal loans may range anywhere from $300 to $10,000 with varying repayment terms.

The below table outlines a rough guide of what personal loans are potentially available through Monzi’s network of credit providers.

Loan amountTermsSecurity required?
$300 to $2,000Up to 12 monthsNo
$2,001 to $4,60013 to 24 monthsYes
$5,000 to $10,00013 to 24 monthsYes

The actual repayment terms of your loan may not reflect what is presented in the above table.

Looking for a loan agreement?

Need a credit provider? Monzi may be able to help. In short, apply on our site and we may be able to match you with a lender in no time. Moreover, with a 100% online and paperwork free application process, you could apply in minutes.

Want more Monzi Loans? Keep in touch on Facebook, Instagram, Twitter and Pinterest.

Factor In

Costs

Two credit cards
Two credit cards

You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000

Terms

12 months

Costs

20% upfront establishment fee

+ 4% monthly fee

Example

Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate

Loan amount

$2,001 - $4,600

Terms

13 months

24 months

Costs

48% annual percantage rate

67.41% comparison rate p.a.

Example

Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principle Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Interest Rate for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000

Terms

13 months

24 months

Costs

21.24% annual percantage rate

48% comparison rate p.a.

Example

Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principle Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Interest Rate for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.