Hidden Bank Loan Charges That Would Make a Pick-Pocket Envious
Hidden Bank Loan Charges That Would Make A Pick-Pocket Envious
Applying for bank loans is a common practice in today’s world. Whether it is to buy a house, a car or to start a business, people rely on bank loans to meet their financial needs. However, what most people are unaware of is the presence of hidden charges in bank loans that can skyrocket the cost of borrowing. These hidden bank loan charges are so well-hidden that they would make a pick-pocket envious. In this article, we will shed some light on these charges so that you can make an informed decision while taking a bank loan.
1. Processing Fees
Processing fees are one of the most common hidden bank loan charges that most lenders charge. This fee is charged by the lenders to cover the cost of processing your loan application. It is usually a percentage of the loan amount and can range from 1% to 5%. So, if you are taking a loan of $10,000 with a processing fee of 3%, you will have to pay $300 as processing fee alone. This fee is usually deducted from the loan amount itself.
2. Prepayment Penalty
Prepayment penalty is a fee charged by some lenders if you repay your loan before its due date. This fee is charged to compensate the lender for the interest it would have earned on the loan if you had not paid it off early. This fee can be significant and can wipe out the savings you could have made by paying off your loan early.
3. Late Payment Charges
Late payment charges are yet another hidden bank loan charge that you should be aware of. A late payment charge is usually a percentage of the installment due and can be applied if you fail to make your loan payment on time. This charge can vary from lender to lender, and it can accumulate over time, making your loan even more expensive.
4. Insurance Charges
Insurance charges are another type of hidden charge that many lenders apply to loans. Some lenders require borrowers to purchase insurance to cover the loan amount in case of unforeseen circumstances. This insurance premium can be charged upfront or added to the monthly installments, making the loan more expensive.
5. Document Charges
Document charges are another hidden bank loan charge that most borrowers are not aware of. Document charges are charged by some lenders to cover the cost of preparing the loan documents. This charge can be a fixed fee or a percentage of the loan amount.
6. Cancellation Charges
Cancellation charges are applicable if you decide to cancel your loan after signing the loan documents. These charges can vary from lender to lender and can be significant.
In conclusion, hidden bank loan charges are a reality, and borrowers should be aware of them before taking a loan. While some of these charges may appear small, they can add up to a significant amount over the life of the loan. Therefore, it is essential to read the loan terms and conditions carefully and ask the lender to explain any hidden charges that you may not understand. By being aware of these charges, you can make an informed decision while taking a bank loan.