When an individual enters into a financial agreement with a lender, he/she will generally be provided with a credit contract. Credit contracts outline all of the details of a financial agreement. This will include the amount of the loan, the payment obligations of a borrower, and the interest that will be charged on a loan.
Many of the disputes and complications that arise between creditors and debtors stem from borrowers failing to review all aspects of a credit contract. Often, when consumers are extended credit contracts, they may believe that they are being treated fairly and they may take the words of the creditor at face value. If a consumer fails to properly analyze a credit contract, though, he/she may end up losing money, usually due to high interest rates.
A contract is a legally binding agreement. Therefore, if a consumer signs a credit contract, he/she is obligated to adhere to the agreement until the contract expires. Therefore, it is extremely important for individuals to read all portions of credit contracts before agreeing to the arrangements or signing any documents.
Credit contracts are an essential part of every credit-related agreement. An individual who purchases a home or car, for example, will be provided with a contract that acts as evidence of the agreement. Likewise, a consumer that wishes to purchase a cell phone will be required to sign a contract. These important documents will detail all of the services that should be provided to a debtor, as well as the cost of these services.
It is important for a consumer to make copies of his/her credit contracts and store them in a safe location. These documents will be invaluable if there is a dispute between a lender and a borrower and will contain the agreed-upon stipulations of a financial arrangement. Therefore, if an individual has been charged a higher monthly payment or a higher interest rate than that specified in the contract, he/she can utilize a credit contract as evidence of the breach.