When a person gets his loan approved he has to pay a fixed interest rate on that loan. It is the most important factor to be seen while signing a loan. The lower the interest rate, the lower the amount of money you have to pay every month. Although the interest rates counts a lot but some loan companies still make a fool out of you by adding extra charges and fees other than the interest rates.
Keeping in mind the cancellation fee; one can always refinance his loan to get better and lower interest rates. One can go for variable interest range, which changes with the conditions prevailing. Fixed rates are generally higher as compared to the variable interest rates. But if the conditions are not favorable, variable interest rates can end up being higher than the fixed ones. If the cancellation of loan fee is equal to the amount you will save by doing it, there is no point in doing it.
What Are Extra Costs And Fees On Secured Loans?
There are many cases seen where the lender adds many types of extra costs other than the interest rates such as insurance of life, fire and civil responsibilities. Some loan companies also have the policy of charging administration fees and the closing costs. While making a deal with a lender the borrower should always study the full contract to judge what he will be paying in total with this extra amount of costs and fees charged. The lenders often do not clarify in advertisement about these hidden costs that the borrower will have to pay.
Cost of Cancellation
There is a cancellation fee charged on the pre-payments of loan and the other type is which is taken from the borrower when he is unable to pay in the given time. The lender lends out a loan with an aim to get maximum profit on the money he has given to the borrower. In order to achieve this goal he puts on these charges so that you are bound to pay back in time. These charges are always a part of the agreement in all types of loans.
If the borrower has these charges in mind he will not opt to do any changes during the contract period. The lender is at a loss if the borrower makes any change or is unable to pay the installment on time. Therefore the borrower will have to pay an extra amount with the next installment due. The lender can take legal action against you if you fail to pay the amount in more than one installment. Sometimes lenders take this fee before hand in order to be safe from any frauds. It is known as pre-cancellation fee.
Length and Amount of a Loan
One should always try to take a loan for a shorter period of time in order to save up on a secured loan and pay it as early as possible. The longer the period of loan the higher will be the costs and the interest rates and the full amount you will be paying. This is why paying of a loan over a shorter period of time is always better if you can afford to do it.