What to Check Before Signing Your Personal Loan Agreement

The interest rate is usually the first thing borrowers look at, but a personal loan agreement contains several other clauses that materially affect what the loan actually costs and how it's repaid.

Clauses worth reading carefully

• APR (Annual Percentage Rate) - this reflects the total cost of the loan, including processing fees and other charges, not just the base interest rate, and gives a more complete picture for comparison
• Prepayment and foreclosure charges - what you'd pay if you want to close the loan early or pay down part of it ahead of schedule
• Late payment penalties - the exact charge and how it's calculated if an EMI is missed or delayed
• Processing fee and any other one-time charges - deducted upfront or added to the loan amount
• Rate reset or floating-rate clauses, if applicable - whether and how your interest rate can change during the tenure

The Key Fact Statement (KFS)

Under RBI's Digital Lending Directions, regulated lenders are required to provide a Key Fact Statement - a standardised, simplified summary of the loan's cost, APR, and terms - before you accept the loan. This is designed specifically to make the real cost easier to see than parsing a long-form agreement alone, and it's worth reading before signing anything.

The cooling-off period

RBI's Digital Lending Directions also require a cooling-off period (a minimum window, typically at least 3 days for tenures of 7 or more days) during which you can exit the loan by repaying the principal and proportionate APR, without additional penalty. Knowing this window exists is worth keeping in mind even after you've accepted an offer.

Reading these sections before signing - rather than only the interest rate at the top - is what actually determines whether a loan fits your situation and budget.