Lenders often charge fees to pay for costs associated with providing a personal loan. The types of fees you may encounter include origination, processing and late fees, among others. But it is possible to reduce personal bank loan fees or get your lender to waive them entirely. Before taking out an unsecured loan, review these five fees that lenders might charge.
1. Origination Fee
Some lenders charge a loan origination fee when you first take out financing. Accustomed to cover the costs to process and underwrite your loan, origination fees are calculated like a percentage of the loan amount. These fees may be deducted from the amount funded or rolled into the total cost of the loan and paid over time. Origination fees usually range from 1% to 6%.
2. Application Fee
Application fees cover the costs of processing, reviewing and documenting your loan application. The fee is usually paid at the time of application and can be nonrefundable, even if the lender denies your application. Application fees are often observed among personal bank loan lenders.
3. Prepayment Penalty
A prepayment penalty, also known as an exit fee, might be charged if you repay your loan prior to the end of the term. Prepayment penalties are made to cover the eye your lender might have earned over the entire amount of the loan. This fee could be a percentage of the loan balance or a flat rate, and can be fairly expensive. Some personal loan lenders don't charge prepayment penalties.
4. Late Fee
A lender may charge a late fee whenever you miss a payment or fail to pay the loan in full by the end of the term. Just like a prepayment penalty, late fees could be whether flat rate or a percentage of your loan balance. Generally, additional fees can range from about $25 to $50 or between 3% and 5% from the payment per month amount, with respect to the lender.
Remember that if a payment ends up being 30 days or even more past due, your lender may report the delinquency to the credit rating agencies (Experian, TransUnion and Equifax). Once reported, it can remain in your credit history for seven years.
The lending company may charge late fees and a returned check (or insufficient funds) fee without having enough profit your money to cover the loan payment.
5. Payment Processing Fee
Although uncommon, some lenders may charge a payment processing fee, which may be added to every payment you are making. You might see a check processing fee or a fee if you don't subscribe to automatic payments. A lender could also impose a fee to process a wire transfer, which typically costs $15 for every transaction.
How to Avoid Personal bank loan Fees
Not all personal loans have fees attached. To avoid or lessen the fees you incur, take these steps.
- Shop around and compare offers. Many lenders charge fees, although not all. The easiest method to avoid paying fees on your personal bank loan would be to shop around and compare lenders. This way, you know what your costs is going to be upfront so you're not surprised later on.
- Set up autopay. Many lenders offset loan fees whenever you set up autopay. It lowers the risk towards the lender that you'll miss a payment and gives the peace of mind that your loan repayments is going to be made promptly. You will also avoid any additional fees charged from your lender.
- Only borrow what you need. If a lender charges financing origination fee, that is usually a percentage of the number you borrow, its smart to simply borrow the thing you need.
- Just ask. One technique to not pay loan fees is to negotiate fees and other charges together with your lender. A lender may waive fees if you're a good customer or at least lessen the fee amount. But you may never know if you don't ask.
The Main point here
Fees and other charges can also add towards the total price of your loan, therefore it is vital that you closely evaluate the terms and conditions of the loan prior to applying. To make your search for any personal loan easier, check out Experian CreditMatch™ to compare personalized loan offers from top lenders.