There are a number of reasons why you may want to borrow a personal loan. A key benefit of personal loans is that they have fixed interest rates with fixed monthly payments that can stretch for a few years, making the repayment process quite hassle-free. To qualify for a personal loan with a good interest rate, it is necessary to have a favorable credit score. A personal loan with a high-interest rate can increase the cost of borrowing. Apart from the interest, it is also necessary to check the fees charged by the lender. Listed below are certain fees that you should try to avoid paying:
Application Fees
Most lenders don’t charge an application fee. However, some lenders may charge up to $100 as the application fee. This is typically a non-refundable fee that you don’t get back even if your loan application gets rejected. So, avoid applying to lenders that charge an application fee.
Brokerage Fees
If you apply through a broker, you will typically have to pay a brokerage fee. If you have a decent credit score and are willing to do some legwork, you can usually bypass a broker and apply for a loan directly to avoid paying the brokerage fees.
Origination Fees
Certain lenders may charge you an origination fee, which is meant to cover all the costs associated with the overall application process. Keep in mind that not all lenders charge an origination fee. Even if your lender does, you will usually be able to negotiate on lowering it or avoiding it altogether.
Prepayment Fees
Lenders make money through the interest they earn from borrowers like you. So, if you decide to prepay your loan amount, you may be charged a prepayment fee. Thus, it is important to check if the lender charges a prepayment before you sign up for the loan.
Late Fees
If you don’t make your monthly repayment on time, you will be charged a penalty or late fee. To avoid this, consider setting up an automatic payment or a reminder to help you make the payment on time.
If you find that a particular bank charges a lot of fees, consider applying to other lenders with low charges.