Charges for Loans

Getting a loan can be an expensive business. Not only will you have the burden of paying the loan amount back but in addition to this, will be the hefty interest charges providers charge. These are not the only charges companies make, though some of the other costs involved with getting a loan are often forgotten about. 

By this stage you will have looked into the different loan types available to you and made comparisons. You have probably researched into the APR rates various companies offer and have come to some sort of conclusion on the loan provider you want to apply to.

So what other charges are there that you should consider prior to applying for a loan? The most common charges you should look out for when applying for a loan are penalties for early payment, fees for arranging your loan and charges if you want your loan quicker than usual. There may be other less common hidden charges, so it is important that you read the small print very carefully.

Penalty for Early Payment

Charging a penalty for paying your loan before the “due date” if you like is quite common. This is also known as an early repayment penalty.  The clue is in the title and the charge is exactly that, a charge or penalty for paying back the loan before the term of the loan on the contract.

This charge can be avoided as not all loan providers have an early payment penalty. Though most companies do like to add in into the contract as it acts as insurance for them if you pay back your loan early.

Fee for arranging your Loan

This is a charge companies or brokers often make for arranging the loan on your behalf. You are literally being charged for the administration for someone to arrange the loan for you. If you get a loan direct with the loan company this fee can often be avoided. What you will find is that if you get your loan through a broker or financial adviser, they may often include a fee for arranging the loan.

The best advice is to try to avoid this charge altogether and always ask if there is an arrangement fee when applying for your loan. If you cannot avoid the fee, then it is not a huge amount. The charge is usually between 1% and 1.5% of the loan amount so for a loan of £10,000 for example, you would be looking at a charge of about £100 to £150.

Charge for quick Transfer

If you are applying for a loan due to an unexpected expense, then you might be in the position where you need the cash as a matter of urgency. If your loan application has been successful then providers are usually quite prompt in transferring the money into your bank account. This can happen as quickly as within a few days. If you require the loan in what is known as a twenty-four hour loan transfer, then this will usually come at a small charge for the privilege. Unless you are in a position where you need the money as a matter of urgency, your best bet is to wait as providers are generally prompt in transferring the money.

You will probably stumble across most of these charges as they are not usually stated very clearly. Do not be surprised if you have decided on the lender to go with to get you’re loan and then as you are filling out the paperwork you come across certain charges you were previously unaware of.

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