Borrowing money has become a key part of our financial lives. With higher living costs, business goals, and unexpected expenses, loans help fill the gap between what we need and what we have.
But as we borrow more, it is important to understand our rights and responsibilities. This article will cover the key parts of taking a loan and explain what borrowers need to know about their rights and duties.
Loan agreements are mainly governed by the Borrowers and Lenders law (Act 1052), which was passed in 2020. This law sets the rules for deals between borrowers and lenders, outlining the rights and responsibilities of both parties.
It’s important to know that, under this law, a person or entity must have the proper license to be a lender. In other words, not just anyone can give out loans—only those who have a valid license issued under the required law(s) are allowed to do so.
The licensing regime includes the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), and the Non-Bank Financial Institution Act, 2008 (Act 774), among others. The type of licence issued and the mandate it carries usually differ depending on the service(s) you wish to undertake.
Duties of a Borrower in a Credit Agreement
It is very important to remember that when a lender gives money, they expect the borrower to pay back the full amount plus interest.
The main responsibility of the borrower is to repay the loan and the interest that was agreed upon. According to Act 1052, the loan agreement must clearly explain the terms for repayment, highlighting that the borrower’s main duty is to pay back the debt.
In general, the loan agreement between the borrower and the lender decides how and when the borrower should make payments. The agreement might require the borrower to notify the lender before making a payment or set specific times for payments.
However, in spite of these details provided for in the agreement, the borrower is allowed by law to pay off the loan at any time, even before the due date, and the lender must accept the payment when it is made. The lender must also record the said payment on the date of receipt of the payment.
If the borrower fails to repay the loan, the lender has several ways to recover the money, according to the law. However, the lender must first inform the borrower in writing about the missed payment and give them thirty (30) days to pay after receiving the notice.
If the collateral for the loan is something that can get rotten or lose value quickly, the lender does not have to give 30 days’ notice. Instead, they can ask the borrower to pay immediately, and if the borrower still does not pay, the lender can take legal action to recover the loan.
Some of the options open to the lender when the borrower does not repay the loan include suing the borrower, selling or taking possession of the collateral (with or without a court order), or claiming ownership of the property if the loan is tied to a title document. Each of these options follows specific rules set by the law.
Credit Rights of a Borrower
In a loan agreement, the borrower has certain rights that the lender must respect. Sometimes, the loan agreement will list these rights, but Act 1052 also gives the borrower specific protections. For example, the borrower has the right to receive clear and accurate information about the loan.
According to Section 57 of Act 1052, the lender must explain details like interest rates, fees, repayment terms, total loan costs, and any collateral requirements before the borrower signs the agreement. This means the lender cannot charge extra fees that were not mentioned beforehand, and if they do, the court might order those fees to be refunded. The borrower should also be informed of their rights and responsibilities under the loan.
The borrower has the right to ask for a statement showing the status of their loan, including payments made, the remaining balance, fees, and interest. The lender must give this statement within five (5) days of the request. This helps the borrower stay up to date on their loan, track payments, spot any problems, and make informed financial decisions.
Like any agreement, confidentiality is required, and the law enforces this. The lender must keep the borrower’s information private. The lender can only share the information if the borrower agrees if a court allows it, or if it’s required by law. If the lender violates this right, the borrower can file a complaint with the Bank of Ghana to seek a solution.
In summary, the rights and responsibilities of borrowers in loan deals are clearly explained in loan agreements and supported by the Borrowers and Lenders Act, 2020 (Act 1052). Borrowers’ main responsibility is to repay the loan with the agreed interest, while lenders must respect borrowers’ rights, like confidentiality, access to account statements, and clear information about the loan.
These rights are protected by law, and lenders cannot ignore them. While the Act protects borrowers, it also reminds them to follow the loan agreement and repay their debts by according to the Lenders some remedies if the borrower does not repay their debts.
By following this law, both borrowers and lenders are protected, creating a fair and balanced lending environment.
Alhassan Aboagye on behalf of OSD & Partners
