Alongside comparing interest rates, considering the charges associated with a personal loan helps you to avoid paying more than is necessary. Plus, it provides you with the knowledge you need to make sure there are no hidden surprises when it comes to your personal loan fees.
Different lenders charge various fees, so it pays to do your research and check the paperwork before you sign on the dotted line. Let’s take a closer look at what to be aware of when evaluating personal loan fees and charge
Fixed interest rates vary from lender to lender and you could expect to pay anywhere from 6.95% p.a (per annum) to 19.95% p.a, depending on several factors. The amount you plan to borrow, and the length of time you plan to borrow for, both contribute to calculated interest rates.
Generally, the longer your personal loan term, the smaller your repayments will be, but you’ll end up paying more interest. Conversely, the shorter the term, the higher the loan repayments but you’ll end up paying less interest in the long run.
Not only that, but factors such as employment, residence, credit history and demographic profile can all affect the amount of interest on your personal loan. It pays to check what interest rate will apply to you when you seek a personal loan quote, so you know exactly how much you could be paying on top of your initial sum.
Generally, the cost of setting up a personal loan is covered under account fees. Account fees include loan establishment fees, which can be a one-off initial cost of setting up your personal loan. Account fees and personal loan establishment fees vary greatly from lender to lender and may also differ depending on the amount borrowed. Plus, some lenders may charge a higher loan establishment fee in lieu of monthly account fees.
Additionally, some lenders will charge a PPSR (security registration fee) separately, while others include the cost in the establishment fee, or provide PPSR free of charge.
It’s worth checking if your preferred lender charges an up front one-off establishment fee, how much that establishment fee is and what it covers. That’s because loan establishment fees can be added to the approved loan amount and paid to the lender on settlement of the loan.
In addition to setting up your personal loan, some lenders may charge service fees, or lender fees, to cover the cost of managing borrower repayments and account administration. Service fees generally range from 0.25% to 0.5% of an outstanding balance and may be charged per annum by some lenders. Still, other lenders may charge service or administration fees per installment paid.
All lenders charge different fees, so be sure to check what each fee is for, when it is charged (for example, a one-off fee or per installment) and if there are any fees that might be charged for changes made.
For example, some lenders may charge one-off fees for changes to the personal loan terms. Others may charge a fee for a missed repayment that is then added to the next installment cost. And lenders can also charge for payments not made in full that cause an account to go into arrears.
And on that note, life happens. If you need to refinance your personal loan, some lenders will charge a refinancing fee too.
Alongside fees for setting up and maintaining your personal loan, some lenders may charge you for early repayment. Again, this will differ from lender to lender. There are some lenders who do not charge any early repayment fees, and others who charge a flat fee in addition to any calculated losses incurred from you paying off your loan earlier than anticipated.
Unless you win first division, one way to avoid personal loan early repayment fees is to have clear repayment structures that suit your financial situation. Sticking to your repayment plan can not only help you to avoid early repayment fees, but it can also help you to minimise any of the service fees that could be charged if changes to your loan or repayment plans are made.
By doing your research and comparing not only interest rates, but account fees, service fees and early repayment fees, you will have all the necessary information to choose the best personal loan for you. Plus, you won’t be blindsided by any surprise fees either and you’ll know what you might be charged if changes need to be made during your repayment period.
Choosing a personal loan is a big decision and just like information, transparency is power. Now that you have everything you need to know about personal loan fees and charges, you’re well equipped to check twice before signing off on your personal loan.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.