As part of efforts to promote financial literacy and protect consumers from the pitfalls of reckless financial borrowing, the Bank of Ghana (BoG) is advising the public on the best approach to borrow from the bank.
This advisory was contained in a document published by the bank outlining 14 essential rules for customers to ensure responsible borrowing. The bank believes this is a comprehensive guide that every Ghanaian must know before taking a loan.
The guide, issued under BoG’s Financial Literacy Program, serves as a wake-up call for individuals and businesses to make informed, disciplined financial decisions.
Here’s what the Bank says you must know before signing any loan agreement:
1. Borrow Only When Necessary
Only take a loan when you have a real need for it. Borrowing for non-essential reasons can lead to long-term financial distress.
2. Assess Your Ability to Repay
Critically evaluate your repayment capacity before applying. If your income can’t support regular repayments, think twice.
3. Loans Are Not Free
Every loan comes with interest and charges. Don’t forget: what you borrow, you must repay.
4. Compare Multiple Loan Offers
Don’t jump at the first offer. Always obtain and compare loan offers from different lenders to get the best deal.
5. Demand a Pre-Agreement Disclosure Statement
Before signing any agreement, ask for a pre-agreement disclosure statement, like a proforma invoice, summarizing all terms and conditions. This is your legal right.
The Disclosure must include interest rate, indicating whether fixed or variable, Annual Percentage Rate (APR), which is the total yearly cost of the loan, All fees and charges, including commissions, processing fees, insurance, the Repayment schedule, whether it’s monthly or bullet, and late payment penalties.
6. Know Your APR
Understand the Annual Percentage Rate (APR)—it captures the full cost of the loan. Compare APRs across institutions to find the most affordable option.
7. Be Aware of All Fees
Take note of upfront charges and insist that all fees be fully disclosed. Undisclosed charges are illegal and unenforceable. The lender must refund them if collected.
8. Seek Clarification in a Language You Understand
Before accepting a loan, request a detailed explanation of the terms in a language you’re comfortable with, or consult an independent financial advisor.
9. Read and Understand the Terms
Never sign a loan agreement without fully reading and understanding it. If you’re unsure, seek professional financial advice.
10. Know the Penalty for Early Settlement
You may pay off a loan earlier, but the penalty fee must not exceed 0.25% of the principal. Understand these terms before accepting the loan.
11. Request Your Outstanding Balance
If you intend to settle your loan early, ask your lender for the exact outstanding amount and demand clarity if the amount seems unclear.
12. Stick to the Agreement
Once the loan is granted, comply strictly with repayment terms. If you anticipate challenges, engage your lender before defaulting.
13. Always Get a Signed Copy of the Agreement
Ensure you obtain a copy of the duly signed loan agreement from both yourself and the lender, and keep it for your records.
14. Need Help or Clarity?
The Bank of Ghana urges the public to report any violations or seek guidance by contacting the Complaints Office.
With these 14 golden rules, the Bank of Ghana hopes to instill a culture of informed, responsible borrowing that protects individuals, strengthens households, and safeguards the economy.
As the cost of living and financial products evolve, the BoG reminds all Ghanaians: borrowing is not a lifeline unless done wisely.
