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What is a letter of continuity?
A legal document signed by the borrower before the disbursal of loan amount is known as a letter of continuity. It is a form of acknowledgement given by the borrower that the balance loan amount would continue until it is completely paid off.
Think of it as a formal acknowledgement. By signing this letter, you're confirming to the lender that you understand and agree to one important thing: the loan balance will continue until you've paid it off completely.
In simple terms:
You're signing a document that says: "Yes, I understand that I have borrowed this money, and I will continue paying it back according to the agreed terms until the entire amount is repaid. I cannot stop my loan payments midway."
Why do lenders ask for a letter of continuity
You might wonder why lenders need this document. Here are the main reasons:
- Legal protection for the lender: The letter of continuity provides legal proof that you acknowledged and agreed to the loan terms. If there's ever a dispute about whether you understood your obligations, this document protects the lender.
- Confirms your commitment: By signing this letter, you're formally committing to repay the loan. It shows you understood that you cannot abandon the loan or stop making payments just because you changed your mind.
- Prevents misunderstandings: This document makes it crystal clear that both you and the lender understand the loan will continue until fully paid. There's no ambiguity.
- Standard banking practice: All banks and financial institutions ask borrowers to sign letters of continuity. It's a standard legal practice in the lending industry.
What information does the letter of continuity contain
While the exact format may vary from lender to lender, a typical letter of continuity includes:
- Your personal information: Your name, address, and contact details
- Loan details: The loan amount you're borrowing and the interest rate
- Repayment terms: How long you have to repay (the tenure) and your monthly EMI amount
- Acknowledgement clause: Your formal acknowledgement that you understand the loan will continue until paid in full
- Agreement to terms: You agree to repay according to the schedule without interruption
- Your signature: Your signed agreement to all the above terms
- Witness signatures: Often a bank representative or witness also signs the document
- Date: The date the letter is signed
Key offerings: 3 loan types
Personal loan interest rate and applicable charges
Type of fee | Applicable charges |
Rate of interest per annum | 10% to 30.5% p.a. |
Processing fees | Up to 4.13% of the loan amount (inclusive of applicable taxes). |
Flexi Facility Charge | Term Loan – Not applicable Flexi Loans –Up To Rs 1,999 To Up To Rs 18,999/- (Inclusive Of Applicable Taxes) |
Bounce charges | Rs. 700 to Rs. 1,200/- per bounce “Bounce charges” shall mean charges for (i) dishonor of any payment instrument; or (ii) non-payment of instalment (s) on their respective due dates due to dishonor of payment mandate or non-registration of the payment mandate or any other reason. |
Part-prepayment charges | Full Pre-payment:
Part Pre-payment
|
Penal charge | Delay in payment of instalment(s) shall attract Penal Charge at the rate of up to 36% per annum per instalment from the respective due date until the date of receipt of the full instalment(s) amount. |
Stamp duty (as per respective state) | Payable as per state laws and deducted upfront from loan amount. |
Annual maintenance charges | Term Loan: Not applicable Flexi Term (Dropline) Loan: Up to 0.295% (Inclusive of applicable taxes) of the Dropline limit (as per the repayment schedule) on the date of levy of such charges.
Up to 0.472% (Inclusive Of Applicable Taxes) Of The Dropline Limit During Initial Tenure. Up to 0.295% (Inclusive Of Applicable Taxes) Of Dropline Limit During Subsequent Tenure |
| Credit guarantee scheme fee | Up to 1.18% p.a. (pro-rated daily till 31st March) (inclusive of all applicable taxes) of the loan amount |
| Credit guarantee scheme renewal fee | Up to 1.18% p.a. (inclusive of all applicable taxes) on the outstanding loan amount as on April 01 of the subsequent Financial Year. *Renewal Fee to be collected only for 3 subsequent financial years. **If the Remaining Tenure is less than 12 months, the CG Fee in subsequent years shall be charged prorated. |
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The four stages of the loan process are application submission, document verification, loan approval, and disbursal of funds. These steps help lenders assess eligibility, confirm details, and release the loan amount to the borrower’s bank account.
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