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How to Avoid Hidden Loan Charges

Piggy Bank

Laura Dilon shares a brief guide on saving some bucks by avoiding hidden loan charges. 

If you’re in the market for a new house, a new car or even just a personal loan, it’s important that you be aware of the hidden charges that many of these loans contain. While some lenders will explain these charges in detail, others will avoid discussing them altogether, hoping that you don’t notice them before you sign your loan agreement. If you’ll be shopping for a new loan in the near future, here are the hidden charges that you need to be aware of:

1. Mortgage Loans

Before you sign the documents that will put you into your new home, look at the fine print with a careful eye. Closing costs, origination fees, points, prepayment penalties and even payment protection insurance can all be buried on the last pages of your loan documents. While some of these charges can’t be avoided, you may be able to negotiate with your lender to remove them or have some costs lowered. Most lenders will be more than happy to explain these charges to you, but many will not do so unless you ask.

2. Vehicle Loans

Just like buying a house, purchasing a new vehicle must be done with your eyes wide open. Forget the heady rush that you feel looking at that shiny new car and get down to the business of scouring your finance offer. Hidden charges may include an extended warranty, car alarm, pain sealant, credit life insurance and even GAP insurance. Before you sign your loan documents, tell your salesperson that you want to see a disclosure using the menu system. This report will clearly list the negotiated price of the new car and the prices of extras that have been added. Paying for these add-ons is not required to secure your loan so if you don’t need them, ask for them to be removed from the deal.

3. Personal Loans

While personal loans are fairly straight-forward, especially when they don’t involve the borrower putting up collateral, there are still fees that you need to be aware of. You may end up paying back more money that you think if your lender has hidden an adjustable interest rate, PPI or prepayment penalties in the fine print of your loan agreement. When looking over your loan documents, make sure that every line is filled in. Blank lines are an invitation for unscrupulous lenders who will fill in the numbers after you’ve left the office.

4. Payday Loans

Just like personal loans, payday loans don’t come without their pitfalls. Make sure that you understand exactly how much you will be paying back over the brief lifetime of your loan. People tend to get in trouble with payday loans when they extend their repayment several times. Instead of paying back your loan plus interest, your lender will allow you to make an interest-only payment, usually no more than five times. Before you take advantage of these extensions, you should be aware of just how much you will really end up paying back.

5. Student Loans

Student loans come with disclosure statements that are fairly straightforward. The problem with student loans is that students typically don’t know how much they’ve borrowed in total and don’t understand how much interest they will be paying. Students are also frighteningly unaware of how much deferring their loans will cost them. If you’ve recently graduated from college, do whatever it takes to start paying your loans when they come due.

No one is going to hold your hand during the loan process; it’s up to you to read the fine print and make sure that you aren’t be charged for unnecessary items. If you’re in the market for a loan, make sure that you read the fine print and question the things that you don’t understand. If you qualify for a loan with one company, you can always qualify with another who may treat you more fairly.

About the Author

Laura Dilon is a guest writer for www.ppiclaims.uk.com where you can find information on mortgages, interest rates, and special financing savings.

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