are-there-any-hidden-fees-or-costs-involved-in-short-term-loans

Are there any hidden fees or costs with short-term loans?

are-there-any-hidden-fees-or-costs-involved-in-short-term-loans

Are there any hidden fees or costs with short-term loans?

Depending on which lender you choose to take a short-term loan out with, there could be charges to pay on top of interest and the borrowed amount.

Reading the terms and conditions of the loan will allow you to fully understand if there are hidden fees or costs that you’ll be expected to repay.

Charges to look out for

Your loan agreement will cover everything that you have to repay, and all lenders are obligated to provide you with one. The following charges could be included:

Missed payment fee

If you miss a payment, you could be asked to pay a fee. This may be a set amount, and can either be requested as an individual payment, or added to your overall repayment total. In all circumstances and loan agreements, speak to a representative if you think you won’t be able to make repayments.[1]

Transmission fee

This is a charge to cover the cost of processing an application quickly. Usually found for very short-term loans of 20-days or so (such as a payday loan), you may find these are much less common today due to new rules introduced by the Financial Conduct Authority in 2015.

Origination fee

Similar to a transmission fee, this is a charge for setting up the loan.[2]

Extension fee

If you need to push back the final payment date, some companies may charge a fee. This could be demanded upfront, or added to the total cost of the loan.

Broker fees

Brokers offer help to customers for finding the most suitable loan for them based on individual circumstances, and could charge a brokerage fee to do so. Not every broker charges the customer, though; learn more about brokers with our guide.

Late payment interest

Interest is a regular part of loan repayment. However, late payment interest means that for every late payment the interest continues to increase over the total amount of the loan.

Early repayment penalty

Some lenders will charge you a penalty if the loan is repaid in full before the agreed date, to cover the cost of lost interest that would have accumulated over time.

 There’s more to choosing a loan than simply looking at the amount repayable. Interest and fees will impact the overall amount you have to pay back, which can turn an affordable-looking loan into an unaffordable one.

 

Sources

[1] Taken from Moneysupermarket.com – All you need to know about payday loans. Retrieved Feb 12th, 2018.

[2] Taken from Opp Loans – Origination Fee. Retrieved Feb 12th, 2018.

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