Did you know you can challenge your money lenders interest rate?
The key parts of a money lending contract normally are the Loaned amount, interest charged, payment period and collateral. Money lenders are generally aware that the interest rates they charge are both illegal and socially unpopular which are rates above the ceiling or the required rate as under the money lending Act.
In practice in Uganda written loan agreements often indicate the sale of items pledged as collateral. Sometimes loan contracts purport to be assistance agreements to friends in need. Other lenders ask for postdated cheques or assets to be kept in trust by the money lender.
However some registered money lenders do sign loan agreements that more or less accurately reflect the actual terms of the transaction. Although the terms of a loan are verbally communicated transparently to the borrowers who understand the amount they must pay the period of repayment and the guarantees, written loan contracts are deliberately confusing.
Rather than stating the amount of the loan and the interest to be paid , contracts usually imply that the total amount of principal plus which was lent must be repaid, with no mention of interest. These contracts are considered more easily enforceable , not only because they raise illegality or high interest rates but because socially a magistrate is more likely to be sympathetic with claims of someone who made a no interest loan to a friend , than a professional money lender charging 30% per month.
Mandated rate as under the money lending Act provides that money lenders are to have an interest on any money lent out to be 24% per annum and not above it, this thus implies a month installment of 2%. This however has not been the practice of lender in Uganda as interest goes up to 30%.
In case you feel you have been cheated by your money lender however the irregularities can be resolved by filling a case in the commercial court.
THE DUTIES OF THE COURT;
1. The court has power to recall the contract of money lending that has unfair terms.
2. The court can reopen a contract of money lending and relieve a borrower of his obligation if he or she was cheated and exploited.
3. The court can order the return of collateral sold illegally by a lender.
4. Court can determine if an interest rate has been harsh and excessive.
In the event a person feel unfairly treated in a money lending contract one can have the contract reviewed and the challenges addressed.
African proverb ; When people are asking for money they are seated when time for repayment of the loaned amount is due they stand up and shout.