9 Questions to Ask Before Signing a Loan Agreement

A loan agreement is a legal document, not just a formality. Asking these 9 questions before you sign can save you thousands over the life of the loan.

1. What’s the APR, not just the interest rate?

APR includes lender fees on top of the interest rate, giving you the real cost of borrowing. Two loans with the same interest rate can have very different APRs.

2. Is the rate fixed or variable?

A variable rate can rise over the life of the loan, changing your payment unpredictably. Know exactly what could trigger a change and by how much.

3. Is there a prepayment penalty?

Some loans charge a fee if you pay them off early. If you might want to pay ahead of schedule, this detail matters a lot.

4. What happens if I miss a payment?

Get specifics on late fees, grace periods, and how a missed payment affects your credit report before you’re actually in that situation.

5. What fees are included beyond interest?

Origination fees, application fees, and administrative charges can add real cost. Ask for every fee itemized in writing.

6. Is the loan secured or unsecured?

If it’s secured, know exactly what asset is at risk if you default, and confirm you’re comfortable with that risk.

7. Can I get the terms in writing before committing?

A reputable lender will provide full terms in writing before you sign. Reluctance to do this is itself a warning sign.

8. What’s my total repayment amount?

Ask for the total dollar amount you’ll repay over the full term, not just the monthly payment, principal plus all interest and fees combined.

9. Is the lender licensed in my state?

You can verify this through your state’s banking regulator before signing anything, a quick check that rules out unlicensed lenders entirely.

Before you sign, run the numbers yourself with our loan calculator to confirm the payment and total cost match what you’re being told, and review our list of predatory loan red flags if anything feels off.