Check Your Loan Agreement Before You Sign
KnowMyContract reads your loan agreement and flags prepayment penalties, hidden processing fees, floating-rate escalation, cross-default triggers, one-sided repricing rights, and aggressive collection clauses. You see every risky clause with plain-English meaning and negotiation suggestions in about 10 seconds.
What else KnowMyContract checks
- Foreclosure/prepayment penalty on any loan type
- Discretionary interest-rate repricing
- Cross-default clauses triggering acceleration
- Undisclosed processing and convenience fees
- Aggressive collection or arbitration-only dispute clauses
What are the most common hidden fees in loan agreements?
Processing fees (1–3% of principal), documentation charges, foreclosure penalties (2–5% of outstanding), late-payment fees, cheque bounce charges, and 'convenience fees' for online payments. These are often disclosed in a schedule rather than the main body, so they're easy to miss.
The effective interest rate after fees is often 1–3 percentage points higher than the headline rate. KnowMyContract extracts every fee reference and computes the practical cost so you can compare offers apples-to-apples before signing.
Can I prepay my loan without penalty?
In India, RBI rules prohibit prepayment penalties on floating-rate home loans to individuals; other loan types often carry 2–5% penalties. In the US and UK, most personal and mortgage loans allow prepayment, though some fixed-rate products carry early-repayment charges. Check your specific clause.
Prepayment freedom matters if you expect windfalls (bonus, inheritance, refinancing). A 3% foreclosure penalty on a ₹10 lakh loan is ₹30,000 you'd save by choosing a no-penalty product. KnowMyContract flags prepayment restrictions as high impact.
What is a cross-default clause and why is it risky?
It says a default on any other loan (yours or a related entity's) triggers default on this loan too. That gives the lender the right to accelerate — demand full repayment immediately — even when you're current on this loan. Cross-defaults are common in business loans and increasingly appear in personal loans.
Ask for cross-defaults to be limited to loans with the same lender, or removed entirely. If retained, request a cure period (30–60 days) before acceleration. KnowMyContract flags cross-default and cross-acceleration clauses as high risk.
Can the lender change my interest rate after I sign?
For floating-rate loans, yes — but only in line with a defined benchmark (repo rate, prime rate, SOFR). Watch for clauses that let the lender reprice at 'sole discretion' or add a spread without notice. Fixed-rate loans should be locked, though some contain conversion or reset clauses at defined intervals.
The critical language is 'benchmark plus fixed spread' vs 'as determined by the lender.' The first is transparent; the second is a blank cheque. KnowMyContract flags discretionary repricing and suggests you request benchmark-based language before signing.
Frequently asked questions
- Does KnowMyContract work for home loans and business loans?
- Yes. Personal, home, auto, business, and consumer-durable loans all share the same risk patterns and are covered by the same analysis.
- Will KnowMyContract tell me if the interest rate is competitive?
- No — pricing benchmarks vary by lender, product, and credit profile. KnowMyContract focuses on the clauses that create risk regardless of rate, such as fees, prepayment, and default triggers.
- Is my loan document stored?
- No, unless you save it to your Vault. Text extraction runs in your browser and personal identifiers are stripped before analysis.
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