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Exercise Caution in Acquiring Loans – BOG

The Bank of Ghana (BoG) has made public, important information pertaining to the acquisition and repayment responsibilities of customers seeking loans from banks and specialized deposit-taking institutions.

The Bank said there was a need for persons to critically assess their loan repayment capabilities prior to obtaining a loan facility.

“Borrowers are advised not to rush to acquire loans. Where possible, they may obtain and compare offers from multiple lenders before deciding on the best deal.

The Central Bank also directed lenders to make sure that before a borrower signs a loan agreement, they are given what is called “Pre-Agreement Truth” in lending statement (Similar to Proforma Invoice) that summarises the terms and conditions associated with the loan.

This should disclose all the conditions that is contained in the loan agreement.

The regulator noted that this information on the ‘Pre-agreement Truth’ in lending statement should include:

  1. Interest rate of the credit facility (indicating whether fixed or variable).
  2. Annual Percentage Rate (APR)
  3. Other fees and charges such as commissions, administrative or processing fees, commitment fees, insurance. d. Bundled products and services.
  4. Repayment Schedule.

In taking the decision to accept a loan offer, customers should look out for interest rate which in this case should be the Annual Percentage Rate (APR), which represents the total cost to be paid to the lender each year for the loan, expressed as a percentage.

“Note that the APR provides a broader measure of the cost that a borrower pays for taking a loan. The APR reflects not only the interest rate but also the other fees and charges that borrowers have to pay for the loan,” it said.

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