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Personal loans can be a great option for you to acquire the funds that you wouldn’t have been able to avail otherwise. The personal loan help people in getting things they are in need of now and allows them to make the payment later.
For the people who are not completely aware of how a personal loan works, it is an easy borrowing method, which provides people the amount of money they need. The money is lent to the borrower with an expectation of receiving it back along with an interest later.
Without considering the amount of money involved, there are various fee and charges attached to every loan, including the personal loan interest rate. However, these fees come in several different sizes and shapes. At times it gets difficult to notice all the fees involved during the acceptance of the personal loan.
That said, you must be well aware of these multiple fee and charges associated with your personal loans. You must also know how to avoid some of these fees.
First, let us go through the different fees you may come across meshed in the terms & conditions of your loan.
Listed below are the different fees you can expect while taking out a personal loan in the UAE.
The late payment fee is the most common fee to expect on any personal loan. As you may already know, you need to make the payment on your personal loan within a fixed timeframe.
In case you fail to make this payment by this pre-determined date, you will have to bear financial consequences. These consequences range from an established pre-decided fee to paying a penalty in the form of a certain percentage of your balance.
There are not a lot of ways around this fee because failing to meet the payment date of a loan is intolerable for many lenders.
While processing personal finance, the lender will have to bear some administration-related cost. This amount is pretty small and is usually around one percent of your loan amount.
However, the processing charges for a loan vary from one bank to another. This fee is basically charged by the lenders for covering the underwriting and credit checks cost. It is usually a flat amount deducted from your loan amount.
There are a few lenders who offer personal loan at zero processing fee. You can consider these lenders in case you wish to save on your loan expenses.
An early settlement fee is another fee that is charged by the majority of lenders in the UAE. In order to make payment of your loan before the expected date, you will have to pay a penalty to your lender.
You may find it uncanny to get punished for wishing to pay back the borrowed funds earlier. But, with this penalty, the lenders intend to cover the interest that they would have collected during the determined tenure of the loan. This fee guarantees the whole cost of the loan for the lender, regardless of when you plan to repay it.
This fee varies from one lender to another and from one borrower to another. An establishment fee is a fee that you must pay in order to make the lender consider you a borrower and cover the cost of loan processing.
Before this charge is processed, banks go through your financial or credit history for determining whether you would make a suitable candidate for finance in the first place or not.
If the lender finds out that you do not have a very attractive credit history, they will consider you to be a riskier borrower and may probably charge a higher establishment fee. While a lot of people consider this fee to be ridiculous, this is how loan providers remain certain that they are lending the funds with as low risk as possible.
In case you wish to reduce this fees or even better, eliminate it fully, try improving your credit.
Your lender may also offer you credit insurance while taking a loan. This insurance lets you file a claim for covering payments that you may have missed because of some unexpected personal hardship or tragedy.
This fee is a monthly payment that is added up to the repayment amount; however, it is not compulsory to include credit insurance in your loan.
In case you want to cancel your loan after it has been approved or disbursed, you may have to bear a loan cancelation fee as per the discretion of your lender. Some lenders charge a flat rate on the cancelation of a loan.
Other lenders do not charge a flat cancelation charge but will charge you the interest payment applicable between the days of loan disbursal and cancelation and the processing fee would not be refunded.
Hence, you must think before applying for personal finance as its cancelation can prove to be expensive. Moreover, you are advised not to go for multiple loans in a short time duration because that would have a negative impact on your credit score.
If you need a duplicate statement of your schedule of payment, or you lose track of the balance of your outstanding amount of loan at any time, you may approach your lender for the same. Your lender gives you all this information by levying a small amount of fee.
Always keep in mind that hidden charges may pop-up irrespective of the advertisements that say you won’t be in for any surprises. The best step you can take for protecting yourself from several fees is meeting with many lenders before you decide on taking out a loan.
Some may offer more pros and some may offer more cons as compared to each other. This is the reason why a suitable lender for you is based on your particular financial situation.
You would want to ensure that the representative you are meeting with is completely transparent while explaining the terms and conditions and the fee involved in obtaining the loan. If you are well-informed about these things, you do not have any reason for shying away from taking personal finance.
In a Nutshell
Your loan amount does not include only the principal amount and personal loan interest rate, but it also includes various fee and charges. Make sure that you are aware of these fees before applying for the loan.
Personal finance is an amazing tool used by the majority of people in the UAE for successfully managing their finances. Dodge the loans and look for the best one for yourself.