Some Interesting Clauses in the Home Loan Agreement

A loan agreement is the document that lays out the terms and conditions of the lender. It also informs the lender of the borrower’s consent. It is very important to read what you sign for that very reason. Be informed before you agree.

The agreement could the last thing you want to read. The miniscule font size alone is a turn off. Add to that, too many asterisks, and more than ample number of sections. So, even if reading the document seems to be a mind-numbing task, you have to get it done. This document is legal and once you sign it, you are bound by its terms and conditions.

You must read the document. Because not only will it inform you, it has immense potential for amusement.

• If you have a dispute with the bank during the loan tenure, as a borrower, you cannot issue a stop-payment instruction with respect to post-dated cheques for as long as the ‘facility’ (loan) or any part of the dues is outstanding. In case such an instruction is issued, the bank can initiate criminal proceedings against you under the Negotiable Instruments Act (1881).

• If you, the loan borrower, do not understand English, a declaration in vernacular language needs to be executed and signed by you in the desired vernacular language. There is a special instruction in the agreement regarding the same.

• There is a special ‘Memorandum Regarding Signing’ for those who understand a vernacular language, for an illiterate, and for a blind person.

• According to the agreement, you cannot sell, exchange, partition, mortgage, charge, encumber, lease, or dispose the property till you have got ‘discharge’ from the bank in writing.

• You cannot hold the bank responsible for any delay in construction, giving possession of, completion of property by developer, promoter or society even if the bank has approved or sanctioned any facilities to such a person or entity.

• If you are a resident Indian, you cannot leave India for employment or business or stay long-term outside India without fully repaying the loan. You cannot stay out of India for any purpose for more than 60 days. There should not have been a change in the citizenship nor should you have made any earnings or income during this period from abroad.

• If you have taken a ‘home equity’ or a ‘top-up loan’ you cannot let out the property for use/occupation by another person without prior written permission from the bank.

• Oh yes, and this one is a personal favourite, see if it’s yours too – It is not clear whether banks are bound by law to notify you of changes in their policy. But, the agreement binds you to remain acquainted with a bank’s rules/terms and conditions affecting or relating to the loan taken.

And well, the borrower has to sign each page of an agreement at least once, as indicated. So say, in a 47-page agreement, you may have to sign up to 72 times.

There’s an instruction on the agreement that says that all borrower(s) are requested to put complete signature(s) on the document, wherever crosses are marked i.e. an ‘X’. And, there are 21 such crosses in a 47-page agreement. (You may want to ask, why 72 signatures then?)