Personal loans are a great way to get the money you need, but they can be confusing. Generally as per Lantern by SoFi experts; “Getting a $5,000 personal loan may not require good or prime credit. Subprime borrowers with fair credit scores between 580 and 669 can qualify for $5,000 personal loans in some cases.”
Personal loan providers have different charges and fees that depend on their policies and how they determine those fees. Make sure you understand all of them so you can plan your finances accordingly!
Application Fee
The application fee is charged to process your application. Once you submit a loan request, the lender will need to verify your identity and review all of your personal details before approving the loan. You’ll have to provide proof of income and other documents pertaining to your credit history, which can take time and effort on both sides. The application fee covers these costs so that borrowers aren’t left paying for anything extra during this process.
Processing Fee
The processing fee is the amount charged by the lender to process your application. Processing fees are often charged upfront and will vary from lender to lender. In most cases, processing fees won’t be charged if you have been approved for a loan but may apply in certain circumstances, such as when you cancel an appointment with a financial advisor without giving 24-hour notice or fail to show up for an appointment that was set up on your behalf.
Processing fees should not be confused with origination fees which are used by lenders as part of their business model and help offset the cost of making their money available through loans.
Prepayment Penalty
You will most likely have a prepayment penalty if you have a loan that is fixed for the life of the loan. Prepayment penalties are charged when you pay off your loan before it’s due, or in other words, before the term of your loan has ended.
Prepayment penalties are legal and they can be used by lenders as a way to cover the costs associated with making loans available. However, they aren’t always necessary as there may be other ways that lenders can recoup their losses without charging borrowers in this way.
Late Payment Penalty
The late payment fee is one of the most common charges, but it can also be one of the most expensive. The fee is typically between $10 and $30, depending on what you owe and how much you owe.
The late payment penalty covers a variety of circumstances that make it more difficult for lenders to get paid back on time:
- If you pay less than half your monthly payment by the due date (which could be as early as the 5th or 6th day).
- If you miss an installment due date by 30 days or more (though this depends on each lender’s policies).
- If you don’t make any payments for a certain period of time.
This article must have helped you understand the different loan charges and how they affect your personal loan. You can take a personal loan for anything you need, but it is better to plan your finances so that you can avoid all the penalty fees. Take time to make sure you understand what each fee will cost before applying for one of these loans so that when it comes time to pay back the money owed, there won’t be any surprises left!
