How To Avoid Hidden Loan Charges

How to​ Avoid Hidden Loan Charges
Taking out a​ loan is​ extremely simple nowadays,​ with so many companies offering loans to​ more people and at​ excellent rates .​
However,​ some of​ the​ deals that seem to​ good to​ be true often have hidden charges that can make the​ loan costs much higher than you​ might have known .​
If you​ know about the​ dangers of​ these hidden charges,​ then you​ can easily avoid them and get a​ loan that is​ cheap and fair.
More than just APR
When you​ are shopping for a​ loan,​ you​ need to​ remember that the​ costs involved in​ repayment are more than just the​ advertised APR or​ Annual Percentage Rates .​
There are many other charges that you​ need to​ take into consideration,​ many of​ which the​ lender will not clearly point out .​
It pays to​ know about these extra charges,​ so that you​ can get a​ loan that suits your needs and doesn’t put you​ under financial pressure.
Redemption fees
Most lenders do not talk about redemption fees when you​ make your application,​ but they are something that you​ should know about if​ you​ want to​ pay back your loan early,​ which many people do .​
When paying back your loan early,​ many lenders will charge you​ up to​ two month’s interest for doing so .​
These penalties are usually the​ same whether you​ pay back your loan straight away or​ a​ month before it​ finishes .​
However,​ more and more lenders are starting to​ reduce or​ scrap these penalties,​ as​ borrowers become more aware of​ their implications .​
Before taking out a​ loan,​ find out whether or​ not the​ lender charges redemption fees,​ especially if​ you​ are taking out a​ loan that you​ will repay early.
Rule of​ 78
Redemption fees are not the​ only thing you​ should look out for if​ you​ are going to​ repay your loan early .​
There is​ also a​ charge called the​ rule of​ 78 .​
This rule is​ quite complex,​ but lenders rarely mention it .​
Basically,​ if​ you​ repay your loan early,​ then you​ have to​ pay extra interest .​
This interest is​ calculated on​ a​ sliding scale,​ and is​ so called because it​ originally came from adding together the​ interest from the​ first 12 numbers of​ a​ 12-month loan .​
So,​ the​ earlier you​ pay back your loan then the​ more interest you​ will pay .​
Although this charged has now been scrapped for all new loans,​ if​ you​ already have a​ loan then you​ should check to​ see if​ this rule applies to​ you.
Loan insurance
Perhaps the​ biggest trick that lenders play on​ unknowing borrowers is​ to​ simply include the​ cost of​ loan protection within your payment .​
Many lenders will simply give you​ a​ quote that includes the​ loan protection cover,​ which can often cost you​ a​ lot of​ money .​
Also,​ the​ lender might include the​ full cost of​ the​ cover at​ the​ beginning,​ meaning any interest or​ penalties are paid on​ a​ higher amount than just the​ loan amount .​
You should always ask a​ lender whether the​ quote they have given you​ includes protection or​ not .​
If it​ does,​ then think about how much you​ could save without the​ protection.
Of course,​ protection can be useful if​ you​ think you​ will need it,​ but there are cheaper options .​
Your current employer may cover you​ for some of​ the​ protection clauses,​ or​ you​ can get similar loan protection from other companies at​ much lower rates than the​ primary lender .​
Making sure you​ have the​ right loan insurance for your needs can save you​ literally hundreds of​ pounds in​ charges .​
Just remember that once you​ know about these hidden charges,​ it​ is​ easy to​ avoid them and find a​ great loan deal.

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