Category Archives: Home Mortgage
How Much Does Your Personal Loan Cost?
A personal loan is a big commitment for your financial future, one that you’ll be living with for years. If you choose the wrong loan package, then the effects will be felt for the full length of the loan term, so it’s obvious that you need to take care when deciding which loan to apply for, and from which lender.
It’s also obvious that getting the cheapest loan possible should be a priority, but how can you properly compare the costs of loans? The first factor that most people look at when determining how expensive a loan or other form of credit is is the APR, or Annual Percentage Rate. This is the interest rate that will be charged on a loan, and the higher the figure, the more expensive the loan.
Although the APR figure is intended to give an accurate picture of the overall costs involved, there are several different ways of calculating it, and so when you compare the APRs of two loans side by side, you might not actually be comparing like with like. Because of this, you should also take a look at the other factors involved in how cheap or expensive your loan will be.
One major thing to look out for is whether the lender or broker will charge an arrangement or setup fee. This is a one off charge which is made when your loan application is approved and completed, and the fee is usually added on to the loan balance and repaid over the term of the loan. This means that not only do you have to pay the fee itself, but also interest, which will make it even more expensive than it initially looks. Arrangement fees are common on secured loans and mortgages, far less so on unsecured personal loans.
The length of a loan term will also have a major bearing on the cost of any loan. While a lower interest rate might be attractive, a low APR over a long term may actually lead to more interest being paid overall than a higher interest rate over a shorter term. It’s usually a trade off between a lower monthly repayment and a lower overall amount of interest paid – the choice is yours.
Many loans and mortgages feature something called an early repayment penalty or fee which is charged if you clear your loan before the originally agreed term. It is usually expressed as a percentage of the outstanding balance, and is most commonly found in loan products that feature an initially discounted rate, or a long term fixed rate, and is put there by the lender to discourage borrowers from taking advantage of an introductory deal and then immediately switching to a new loan, so costing the lender money in terms of lost interest charges. The period in which an early repayment fee may be charged is usually limited to the first few years of your loan, and will be made clear on the loan agreement before you sign.
Even if there is no early repayment charge, many loan companies will charge an ‘exit fee’ of a few hundred dollars if you repay your loan early, perhaps as part of a debt consolidation program. This fee is intended to reflect the administration costs involved in closing your account, but recently there are suspicions that it has come to be seen as another way for lenders to squeeze a little extra profit from the loan.
Finally, one thing to beware of when taking advantage of the payment holiday option available on some loans is that although you don’t have to make a repayment that month, interest will still be charged on the balance – so in effect you’re paying double interest for that one repayment. If you use this option a lot then, over the term of the loan, the effects could add up to produce a substantially higher APR than that quoted when you took out the loan.
Payday Loans and a Nightmare Waiting to Happen
It all starts out nice enough until you pick up the mail and notice a letter from your bank. Apparently due to a simple math error in your checkbook register, you’ve bounced check. Now a bounced check in previous years, would simply have resulted in your bank, requesting that you make good as quickly as possible, along with correlative with modest service fee.
In today’s hyper inflated maximum income driven world however, almost nothing is as bad as a bounced check situation. An attempt to maximize profits, banks have become increasingly more willing to sacrifice good business relationships with long-term customers for short-term gain. Understand we’re not talking about the person who habitually writes bad checks but the average Joe or Jane that makes a simple math mistake or error in judgment.
How many of us have at one time or another made a deposit in the bank and immediately pay our bills without deposit? This can sometimes be a problem depending on how the bank balances its own box. Although many banks acknowledge or post deposits before handling withdraws, some do the opposite in an attempt to maximize overdraft fees.
Some banks will even bounce your check, and then take out their bounced check fees that result in yet another bounced check in your account and another fee etc. Don’t let this happen to you. Use the link below and get a list of payday loan service companies that will give you your first loan interest free.
Smart consumers will check with their bank to understand their overdraft and banking procedures. If you find your account was opened at a bank that posts checks written on your account before your deposits, find another bank fast!
If you are financially solid enough to qualify for overdraft protection, this is probably the best insurance you have available to keep from paying high overdraft fees. Speaking of those fees, instead of the modest service charges banks at one time charged for accidental overdrafts, fees now range from a low of $25 to as much as $40 or more depending on the bank. Should you bounce a check, it’s quite normal for bank fees to be more than $100 especially if you can’t immediately.
Payday loan companies have been accused of charging extremely high interest rates by the government and so-called consumer groups. The fact remains however that your local bank may be charging interest in the form of huge fees that is actually a lot higher than a payday loan service.
So remember that while consumer groups and the government claim to be the consumers friend, they’re not saying much about those huge fees charged by big banking institutions. While they feel safe bullying small payday loan service companies they are apparently unwilling to take up the much larger problem and deal with the large banking corporations. After all, the real reason for saying anything is for publicity and media attention. [smile]