There may come a time when you need to borrow money to pay for a big home repair, your kid’s braces, or a brand new car. That’s why personal loans exist. These loans are also popular for consolidating debt since they tend to offer lower interest rates than credit cards. If you’re thinking about taking a personal loan, here are the fees you should absolutely avoid.
Application Fees
Most lenders don’t charge a fee to apply for their services, but some do. These fees are charged to cover the costs of setting up your new loan and processing your application. The bad part is that they’re non-refundable. That’s why you should look for lenders who don’t charge any application fees to apply. You could even look for lenders that let you pre-qualify without a hard inquiry on your credit report. This way, you could gauge your ability to qualify without any negative impact on your credit score.
Origination Fees
Besides application fees, many popular lenders could charge origination fees or fees levied to originate a loan. Origination fees can vary from lender to lender. Sometimes, your fees could differ even with the same lender, depending on your credit score. Origination fees may be as high as 8% of your loan amount, which is a lot. But, we have good news! Many lenders don’t charge these fees. So, if your credit is good enough to qualify for a lender that doesn’t charge an origination fee, you shouldn’t pay the fee.
Prepayment Fees
Prepayment penalties are fees charged to borrowers who pay their loans off early. No matter what, you must always look for a lender that won’t charge you extra fees for prepaying your loan. These fees are an absolute waste of your money, and they even penalize you for doing the right thing. No matter what your credit rating looks like, never sign up with a lender that charges you money for paying more than you have to.
