In everyone’s life there will no doubt come a time when you are required to take out a loan. This could be a home loan, a personal loan, a student loan and so on. If there is a need for money there will no doubt be a way to get a loan. In fact if we think about it, we’ve been taking out loans as long as we can remember. Whether it be borrowing money from your parents to get lunch at school, or a couple of dollars from a friend to grab a pie at the canteen. However there are a few differences between those loans and a bank loan. A bank loan is where you borrow a certain amount of money from the bank so that you can pay for things you need, these are things such as a mortgage, a new car and so on. You in turn agree to pay back your loan over a period of time, with interest and other fees attached. To gain approval for a loan you must apply for one with your desired bank, who will determine whether or not you are suitable for a loan.
Firstly, to qualify for a loan there are simple minimum requirements.
You must at least 18 years old. You must have a regular income, you must be a permanent resident of Australia (or hold a non-resident visa) and have access to the details of your current financials. Loans are not as simple as banks make them out to be. There are numerous factors that can change and affect the way they are processed and there can be numerous legal ramifications and little clauses. For example, some banks apply a fee if you wish to pay off your loan early! Because of all of these factors that go on with obtaining a bank loan it is important that you get legal advice before agreeing to a loan, otherwise you could be caught in a sticky situation down the track.
This is exemplified by the Commercial Bank of Australia Ltd v Amadio case of 1983. The Amadios were an elderly Italian couple, with little grasp of the English language, and they had agreed to be the guarantor for their son’s (failing) construction business, with the Commercial Bank of Australia. A guarantor is the person/s that guarantee to pay off someone’s debt, should the person who took out the loan be unable too.
The Amadios did not seek independent legal advice on the situation before agreeing to be the guarantor. But they had unknowingly to pay off the loan should their son’s business not be able to do so. The loan was for $50,000, however there was scope for it become even larger. The Amadio’s were unaware of this. They were also unaware of their son’s business struggles and when his company inevitably went into liquidation, the Amadio’s were called upon to pay up, and pay up a lot more than they had originally understood. If the Amadios had sought out independent legal advice, their lawyer would have discovered the fact the loan repayment had the ability to become larger than $50,000. The Lawyer would have no doubt made sure the Amadios were not without all the information and most likely would have suggested they did not sign on as guarantor. The Court found in favour of the Amadios. It was found that it was unconscionable for the bank to allow the Amadios to become their son’s guarantor, for a number of reasons, one of which was that the bank did not suggest to the Amadio’s that they seek independent legal advice. Whilst the Amadio’s did win their case against the Commercial Bank of Australia, they are a prime example of why it is so important to gain legal advice when looking to take out a personal bank loan, or in the case of the Amadios, signing on as a guarantor to someone else’s bank loan. It is easy to get one, but often not so easy to pay one off.
If you are thinking of taking out a loan yourself, or have been asked to be a guarantor on someone else’s bank loan, make sure to contact us at Wollerman Shacklock and we can help you through every step to ensure you are in the best position to complete your loan repayment, without any hassle!