Find Out the Hidden Costs of Short Term Loans
In an ideal world, you should be able to apply for a particular type of loan, choose the amount you need, check the interest rate, get approved and repay the loan with the applied interest. In the real world, a loan is not just about the amount lent or borrower and the straightforward rate of interest. The interest charged can be calculated as simple interest or compound interest. Most lenders tend to account more of the repayments initially towards the interest leaving most of the principal for the later payments. This doesn't affect every borrower but does impair the chances of getting a substantial discount while foreclosing or repaying before the end of the term.
Such disadvantages can be deemed as hidden costs. For instance, processing fee is a hidden cost if the lender doesn't make it obvious. Some lenders are upfront with their policies. They will clearly state that you have to pay a certain fee to have the loan application processed and then approved. This fee is more or less a standard charge for every borrower. However, some lenders charge proportionately. They consider the loan amount applied for and may even consider the repayment term. Accordingly they choose the processing fee. Sometimes it is not called the processing fee but by some other term. Essentially, it is a fee you have to bear.
As long as you are aware of the charges you pay and you agree to pay the same, it should be fine. But you must not be kept in the dark. There are many borrowers who have had to deal with rude surprises when they realized the hidden costs. It doesn't make sense for borrowers to be charged hefty amounts as fees since they are already in need of money. Fortunately, the lending industry has changed over the years and you can get good deals on platforms like Cash Kitty.