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Traditionally, taking out a loan involves a stack of paperwork. When faced with a mound of papers filled with financial jargon, how many of us read all the details and the fine print? How many of us make sure we understand the financial terms used in the loan agreement and the fees we are charged?
In reality, not everyone takes the time to understand the terms and fees associated with their loan. Most people look at the bottom line and ask, ‘How much is this costing me?’ However, by not being familiar with the terminology and not reading agreements carefully, some of us end up paying fees without knowing what they are. The amount of these fees depends on several factors including the lender you choose and the state where you reside.
Due to the Dodd-Frank Act, which helps to protect consumers from predatory lending and unscrupulous financial practices, lenders must disclose terms and fees for all loans. Also, the FTC (Federal Trade Commission) states that lenders cannot include optional fees and financial products without informing the borrower.
Below are some common ‘hidden’ fees you may encounter when applying for a low-interest personal loan. This is not intended to be a comprehensive list of all fees, but merely an overview.
Be Prepared by Educating Yourself
When taking out a low-interest loan, being unfamiliar with these terms may leave you surprised at some point. Before taking out a loan, educate yourself and become familiar with financial terms before signing a loan agreement.
If at any point in the loan process before signing an agreement, you feel uncomfortable with the fees or are unsure of the terms being used, you can always stop the process. A reputable lender won’t pressure you to take out a loan if you are feeling unsure. Once you have signed an agreement, be sure to pay your payments on time to avoid further fees.