These fees might even be bundled into an APR on a loan, making them harder to spot. Comparing the APR between two or more lenders is the best way to see if you’re paying for a hidden fee.
Personal loans with hidden fees are easy to come by: application, origination and prepayment penalties eat up your money and you may end up disliking your lender. This article will inform you about these fees and how to avoid them. 1. Applying for a personal loan involves higher costs. The application fee is charged when you send your application to a lender. It cannot be less than $0. You need to make sure your loan has been verified by the lender before sending your first payment, which can be done by reading the whole loan agreement carefully. 2. Another type of fee, called an origination fee, is deducted from the total sum of your loan by the lender because borrowing money costs money.
Underwriting fee
Mortgage lenders also charge underwriting fees that cover the cost of assessing the buyer’s creditworthiness and the loan application.’ Origination points refer to the ‘various charges added to the loan for originating the transaction’, or getting the loan to the borrower. Other lenders might refer to these fees differently, but either way you might want to search for, scrutinise and read all terms and conditions for every loan offer. Your mortgage lender might waive, or reduce, their underwriting fee based on your credit score and income stability. Refinancing loans will incur underwriting fees because the lender who gives you the mortgage has to check into your financial background and run your credit history. These costs will either be flat fees or a percentage of the loan.
Credit check fee
You end up paying charging fees for your lender to access your credit report anyway, whether this charge is passed on to you upfront or gets added to the amount you owe. Your lender will charge you some amount from a few dollars to a couple hundred in what they call fees in order to provide you with credit. These credit reports are meant to help lenders understand what your current financial picture is, or in other words, your financial condition. This helps them understand how creditworthy – or risky – you are … and, yes, it is important for all of us, as this report is basically your credit history. They use these credit reports to corroborate all the information that you’ve probably provided to them, whether it’s your income or any other document you’ve handed to them. As we’re searching for different personal loans, really understanding these fees is crucial – they can affect your overall borrowing costs drastically; if you’re looking at the APR, that’s how fees interact with your interest rate.
Processing fee
Processing fees are one-time amounts, usually charged by the lender to a borrower to cover the administrative costs of processing an application (eg, processing of documents, credit checks, etc), which may be paid at the time of application or at the time of disbursement. Lenders will charge a processing fee for such services to cover their costs and mitigate their risk. Before applying for a personal loan, borrowers should examine the total cost including the interest rate and any processing fee. Now is a good time to shop around as best as possible, and to have a good credit score, no matter if you are comparing bank loans or remisier loans. As I mentioned earlier, paying less or no processing fees is definitely money-saving, and perhaps you can also negotiate for lower processing fees with your chosen lender.
Documentation fee
Documentation fees cover the costs of preparing, reviewing, and mailing loan paperwork and are generally a small percentage of your total loan amount, either baked into your balance or paid monthly. Except that most lenders charge this fee as a fee to defray the cost of purchasing and maintaining software which supports the loan document preparation and review and/or third-party vendors who provide disclosures, rate-lock confirmation or legal services. This is the same as the ‘doc fee’ that car dealers charge to pay for paperwork during purchase, and several brave dealers have publicly posted notices that they never charge this. Some of our clients save hundreds of dollars each time they buy a new car.
Administrative fee
Knowledge is power, and this applies as much to individuals as it does to business. The more you know about the costs and charges involved in making a loan, the more expert you can be in repaying it, and the less unexpected costs will accumulate. Banks levy an ‘administrative’ fee to cover processing enquiries, checking documents etc, which can either be paid upfront or included as part of the cost of the loan. Administrative fees in the financial sector are also under the scrutiny of regulators, who examine their structure and where they are levied to ensure that their collection is transparent and not unfairly disadvantaging particular services or clients. In private life, consumers and businesses can avoid some of these charges by consolidating their accounts (such as bank or credit card fees); taking advantage of offers where no fees are levied or where the fees are low, and minimal (like some online banks or travel agents); and periodically reviewing and revising fee schedules for regular changes. Choosing lenders with more transparent fee structures should, in the long term, save both money and time.