Many short term loans have unreasonable fees or charges. This practice is quite prevalent for payday loans as well. Some people think that banks are more transparent and it is the nonbanking financial services sector or the private lending industry that is unreasonable with its additional fees and charges. This perception is not entirely accurate. Even banks do have some unreasonable fees or charges, including penalties they do not speak about explicitly. Delve deep into the fine print and you would realize how banks do have unreasonable fees or charges.
It is true that the practice of additional fees or charges is more common among the nonbanking financial institutions or private lenders. Banks would often communicate that there are processing fees and other charges. Many lenders of short term loans, especially those that are unsecured, might not share such significant information. You would only get to know of these charges when the payday loans are approved and perhaps after you have received the amount in your bank account. You would notice that the loan amount is not exactly what you had applied for or what you had been approved for by the lender itself. The processing fees or additional charges may have been deducted and you might fall short of meeting your financial commitments.
There is only one thing you can do and it must be done at the time of applying for short term loans. You should have an explicit discussion about any fees or charges that you think are unreasonable. Not all lenders can be expected to be upfront or forthcoming with such disclosures. It is in your interest that you must clarify. If some lenders of short term loans are not being transparent or they are remaining ambiguous with their commitments, then you should look for alternatives. You should not deal with any lenders of payday loans that are not completely lucid with their lending practices, terms of repayment and every other clause that directly affects you.
- One of the common fees or charges is the commission that many aggregator websites, agents or brokers impose on the loan. You should not pay any such commission. If there were no facilitators or lenders you could find then you would have been compelled to pay such commission. But that is not the case. You have facilitators like Flex Repay in UK that does not charge any commission. You can get access to multiple lenders. You can compare various payday loans and choose to go with the one that offers the best terms and the least rate of interest. Even if you are getting a better proposition elsewhere, you should not pay any commission to any brokerage firm, agency or aggregator site. If they are charging a commission, then they have a vested interest in trying to convince you to sign up for a loan. Such a loan may have quite a few clauses or terms that are not in your favor.
- Many lenders will have fines or penalties for late payments. This is not an unreasonable fee. However, you should be able to find out about this at the outset. You should not be dealt a surprise when you actually miss out on an installment of short term loans or the only repayment of payday loans. The agreement you sign should have all details pertaining to the loan. This includes terms related to late payments and the fines that may be levied on you. Here again, this is not always a problem unique for unsecured short term loans such as payday loans. Such a practice is widespread, even among lenders of secured short term loans.
- Some lenders may charge you a fee at the time of renewal. It is quite possible a borrower would miss a payment and might ask for a grace period or a renewal of the repayment term. This is particularly relevant for payday loans that often have only a month or thirty days to repay. The renewal may or may not have any additional charges. If there are any extra fees, then such information should be communicated to the borrower and the same must be one of the terms of the written agreement.