The following can only be a brief introduction of the legal subject concerned. Before you take any action which may have legal consequence, you should first seek advice from your own lawyer or make an appointment at any District Office to see a volunteer lawyer of the Free Legal Advice Scheme.




(503) BORROWING MONEY (1) - PRINCIPLES OF A CREDIT CONTRACT

Voice

There are many ways of borrowing cash or getting credit for things you want to buy and there are 4 recordings to deal with this topic.

(This recording deals with the basic principles of a credit contract)

Borrowing money means making a contract between the lender and the borrower. The contract may be oral but it is better for it to be in writing as proof of all the promises the parties make to each other. Before you agree to a contract, make sure that you read its terms and understand your rights and obligations.

The 4 most important terms in a credit contract tell you how much you have borrowed, whether you have given any security against a failure to repay the amount borrowed, how much interest you will have to pay and how you are to repay the amount borrowed, for example, the number and size of instalments to be paid.

Some lenders may ask for security for a loan, which means they want something of value which they can claim if the lender cannot repay the loan on time. A security may be in the form of some valuable goods, like jewellery, or a guarantor, that is, a written promise made by another person, like a friend or relative of the borrower, that he will pay off the loan if the borrower does not. sometimes interest on a loan may be less if some security is given.

Interest rates can vary quite a lot between lenders. So, you can always try to find the lender with the lowest rate. The most reasonable interest rates are usually offered by the banks at three percent above the current 'prime rate', that is, the rate of interest at which banks lend to other banks.

In addition to interest, some lenders will charge administrative 'fees' for making a loan available. Make sure you know of all the charges involved before you agree to accept the loan.

The law in Hong Kong gives borrowers little protection against unfair loan contracts. So make sure you understand your obligations BEFORE you agree to borrow money. Once you have signed your name on a contract there is little chance for you to escape liability.

Date of amendment: 1st October 1992