Key Fact Statement (KFS)
- A clear and transparent summary of important loan details.
What is a Key Fact Statement (KFS)?
- A Key Fact Statement (KFS) is a standardized document that summarizes a loan's most important terms and conditions in a clear, easy-to-understand format. Its purpose is to provide borrowers with critical information, such as the loan amount, interest rate, fees, and repayment schedule, to help them make informed decisions before signing a loan agreement. KFS documents is required to enhance transparency and protect consumers from confusion and hidden charges.
What a KFS includes
- Loan Details: Loan amount, type, and disbursement schedule.
- Cost of Borrowing: Interest rate (fixed or floating), all-inclusive Annual Percentage Rate (APR), and any third party or processing fees.
- Repayment: Repayment schedule, instalment amount, frequency, and a breakdown of how payments are allocated to principal and interest.
- Other Charges: Details on late payment fees, prepayment penalties, and any other contingent charges.
- Bank Information: Details on the bank's grievance redressal mechanism.
Why a KFS is important
- Informed Decisions: It provides a single, comprehensive overview of the loan, allowing borrowers to compare offers and understand the total cost.
- Transparency: It ensures that crucial information is not hidden in complex legal jargon, making the loan agreement more transparent.
- Consumer Protection: It acts as a legal safeguard for borrowers by clearly outlining obligations and penalties, which helps avoid future disputes and costly mistakes.
- Accessibility: It is provided in a simple and clear language, often in both English and local languages, to ensure borrowers can comprehend the information.