We have started recently a series of articles on how to spot and avoid scam attempts in loan applications. If you remember, one of the signs was the request to pay any kind of upfront fee. By the way, if you missed that great article, go now and read it: How to avoid the scam in loans (it will open in a new tab, so you will easily continue reading this article after that). Now let’s get into details on the matter of loan processing and granting costs and fees.
When applying for credit, do you have to pay a processing fee?
Whether you apply for a personal loan with a private lender, a broker or a bank, they must invest time to build a file in which certain mandatory documents cost a certain amount of time, effort and money to obtain ad process them.
So, who pays these fees? The private lender, the broker, the bank or the customer?
And how are these application fees billed?
Fees at the expense of the client
All the documents and processes necessary for the building of a loan file such as the extracts of the office of the prosecutions, the identifications with the post office, the certifications of the originals and other more specific official documents requested on a case by case basis, are the responsibility of the customer.
However, these fees are rarely directly billed to the customer, and never before granting and paying the loan amount! In this case, how are these hidden costs passed on to the customer?
Normally, fees are reflected in the rate
Basically, it is the banks itself who obtain the documents, and that your credit request is accepted or refused, no charge is directly invoiced!
Certainly, but indirectly they are, because they are carried forward on interest rates!
There are cases where the loan application processing is charged to the customer with a lump fee, but this money is always deducted frum the amount of the loan. There are some other lenders who work with two levels of interest rate: a lower one if you produce yourself all the documents, and a higher one in case they take care of all documents.
With a broker, no additional fees!
When you go through a broker, you have to know: the banks remunerate them by redistributing part of their earnings. Therefore, going through a broker, you will not have to pay any additional fees.