Are you an entrepreneur intending to apply for a business loan to boost your capital? If yes, do you intend to carry out your due diligence before executing the acceptance column on the offer letter?....., Of course, you should.

I know that the news of your loan approval is exciting. However, it is my humble advice that you familiarize yourself with the terms and conditions of the loan as contained in the offer letter before endorsing your acceptance on the acceptance column. From my research and work experience on this subject matter, it is now obvious that why borrowers default on loans, sometimes, even after a restructuring/rebooking of the loan facility, is due to failure to carry out due diligence and lack of appreciation of the terms of the loan and their implications. Like every other contract, loan agreements become binding upon execution by parties. This means that the terms and conditions of the loan crystalizes, which in effect, occasions rights and obligations on the party entitled and/or obligated, respectively.

Here are some of the key things to note when assessing a loan:

1. the lending rate of your preferred lending institution;

2. the applicable interest rate and lending fees;

3. the applicable penal rate, in the event the loan or any interest due and payable therefrom remain unliquidated at the end of the tenor;

4. charges that are chargeable on a one-off basis and those that are recurrent; and

5. ascertain that the business venture you intend to plough the loan into will yield profit and in time too, to service the loan.

Also, note that interest rates and lending fees are generally negotiable. So, endeavour to have a bite on negotiation. Although, it is duly noted that lending institutions dominate loan arrangements, and may not want to shift ground on the applicable interest rate and lending fees. It is also true that lending institutions are constantly looking for viable business ventures to invest in for profit. So, your job as a borrower is to convince your lender that you are a creditworthy businessman with a viable business venture capable of generating revenue short term. If you can establish this fact, then, the likelihood of reduced lending fees and charges is high.

After disbursement of the loan facility, keep up with deductions made on the loan account as repayment of the principal sum and interest due and payable to ensure that the proper interest rate is applied on the loan. If you observe at any time that a different interest rate or charge is applied on the loan. Please, swiftly lodge a complaint with the lending institution to ratify the same. Where the lending institution persists in this unfair practice, the door of the Consumer Protection Department of the Central Bank of Nigeria (CBN) is open to receiving such complaints as the regulator of banks and other associated financial institutions.

The application of excessive interest rates and arbitrary charges by lending institutions has been identified as the major cause of the non-performance of loan facilities by unsuspecting borrowers. This unfair practice implies that the financial obligations of the borrower are fraudulently reviewed upward without his/her consent. The heart-breaking aspect of this antic is that a borrower who is not properly advised will be unduly coerced by the lending institution to perform the contract.

On this note, the next time you intend to assess that loan, endeavour to carry out your due diligence. And if you think the legal jargons and figures contained in the offer letter are way beyond your appreciation, kindly engage a lawyer to advise you on the legal implications of the terms and conditions of the loan, and an accountant or auditor to advise you on the figures with its attendant monetary implications. I humbly think it will be in your best interest to employ the necessary professional services for a humble fee than to liquidate your indebtedness through your nose and/or forfeit the collateral used in securitizing the loan.

Do you also consider the mental and psychological trauma that is associated with being tagged a debtor?