Loan preparation fee – what is it?

 

The preparation fee is one of the costs of the loan that people using non-bank financial institution products may have encountered. However, it is worth noting that not all lenders include it in their offers. Therefore, pay special attention to what and how much we have to pay. What is the setup fee and what is its cost?

What is the setup fee?

What is the setup fee?

The preparation fee is one of the components of the total cost of the loan. When we apply for a loan, the lender is required to analyze our creditworthiness and then prepare the contract. Undoubtedly, these activities take time and require a certain amount of work from the lender. Therefore, many companies introduce an additional preparation fee to their offers, which aims to compensate for the cost incurred. Its amount should be constant due to the fact that for each applicant these activities do not differ and take the same amount of time. However, in fact many loan companies make the value of the setup fee dependent on the amount we are asking for. The higher the loan, the more we have to pay. Finally, it is worth noting that this is a one-time payment!

How to check the amount of the preparation fee?

How to check the amount of the preparation fee?

When we decide to take advantage of the offer of a given lender, we should check the most important information regarding the terms of the contract and the costs of the loan entered. We can find them in information forms, a framework agreement or in a representative example. It is worth noting that sharing such data is the responsibility of the lender under the Act of May 12, 2011 on consumer credit (Journal of Laws 2011 No. 126 item 715).

The lender can also do this during the interview. However, regardless of how he informs customers about the costs, he is also required to include this information in the loan contract. In addition, it is worth remembering that we usually have a virtual calculator after switching to the lender’s website. This tool allows us to check the monthly installment and costs depending on the loan parameters. Using the sliders, we can specify the loan amount and loan period. Then, in response, we will receive not only the overall amount of costs, but also the division into individual components. Thanks to this, we’ll find out if the company requires a preparation fee.

What makes up the total cost of the loan?

What makes up the total cost of the loan?

To consciously choose the right offer, you should know what makes up the total cost of the loan. The information about this subject will be provided primarily by the APRC parameter. This abbreviation hides the current annual interest rate, ie the indicator informing about the cost of the liability per annum. However, we must remember that for shorter or longer than 12 months the dates will be ambiguous. In this situation, you should also use the information displayed in the virtual calculator. If we are interested in the loan offer for free, then the APRC must be 0%. This is a guarantee of the absence of any non-interest costs and interest.

What makes up the total cost of the loan? These will be primarily interest, which is calculated on the basis of the applicable interest rate. If an RSO appears on the lender’s website, we must know that this is not a mistake. This abbreviation stands for an annual interest rate and reflects the amount of interest we will pay per year. The second most popular fee is commission. Its value can be determined in both percentages and dollars. Some companies require a one-off payment of the entire amount, others divide it proportionally into each loan installment. Non-interest loan costs also include an administrative fee that includes the activities of the employees dealing with the liability. Their tasks include: managing the repayment schedule or booking payments.

These fees also include insurance, although most lenders have already left it. Most often we will meet: interest and commission. The second most popular fee is commission. Its value can be determined in both percentages and dollars. Some companies require a one-off payment of the entire amount, others divide it proportionally into each loan installment. Non-interest loan costs also include an administrative fee that includes the activities of the employees dealing with the liability. Their tasks include: managing the repayment schedule or booking payments. These fees also include insurance, although most lenders have already left it. Most often we will meet: interest and commission. The second most popular fee is commission. Its value can be determined in both percentages and dollars.