When you take out cash loans, you have to pay a price for borrowing money. Generally, this applies to each and every credit product available in the market. The price consists of two components. Interest is the main one. The other one is the set of fees which you will have to pay. Find out more about the main fees charged by cash lenders and how they will affect the repayment of the loan.
Initiation Fee
This is a fixed fee which is for the initiation of the cash loan. It is usually a percentage of the borrowed amount, but it may also be a fixed amount of money. It depends on the policy of the lender. Since borrowers typically opt for these loans in emergency situations, the fee is automatically added to the total amount which has to be repaid. It is not paid at the time of the initiation of the loan, but as the borrower pays the regular instalments. You have to confirm that it will not be added directly to the principal amount so that interest is charged on it.
Service Fee
The type of fee is also known as management fee. It is designed to cover the lender’s cost for servicing the cash loan. It is typically charge monthly. Less often, it is charged fortnightly. The fee amount may be calculated as a percentage of the principal or it can be a fixed sum. In any case, it is possible to save by getting a loan with a shorter term. In this way, you will save on interest as well since it will be charged for a shorter period of time. Still, you should know that the shorter term will results in larger regular instalments.
Direct Debit Fees
Most cash loans are repaid via direct debit transfers. The instalment amount is automatically withdrawn from the borrower’s account on the due date. The lender may charge a fee for this automated repayment. This is generally rare, but you should check just to be on the safe side. It is also important to check whether your bank will charge a fee for this kind of withdrawal.
Finally, you should calculate precisely how much the cash loan will cost you given all fees and the interest rate. Keep in mind that some lenders wrap the fees into the interest rate which is charged. This makes it easier to calculate the total cost and to plan for the repayment of the loan, but you have to ensure that this will not make borrowing more expensive.
