Persons using payday loans or other non-bank online loans rarely have the opportunity to meet the setup fee, as it is not widely used. However, it is worth knowing where and when the lender has the right to apply it and what are the general practices of loan companies in this matter.
What is the setup fee?
As the name suggests, the preparation fee is charged for preparing a loan offer for the applicant (remember that the final shape of the loan depends only on the loan institution). It is related to the amount of work or financial effort that a company must incur in order to examine the borrower’s creditworthiness, verify his payment history, withdraw money or deliver it to him.
What determines the amount of the preparation fee?
The method of calculating this fee is rather not publicly explained, and each institution applies its own tariffs. Importantly, unlike the commission, the amount of the preparation fee should not depend on the amount of the loan or the repayment period, although this is different and it is not illegal under any circumstances. Therefore, it is better to get acquainted with the costs charged before submitting the loan application.
Pursuant to the Act on consumer credit, the lender cannot withhold any costs – the consumer’s right to information obliges lenders to disclose the total amount to be repaid as well as the types and amounts of all cost components. Theoretically, there should be no problem to obtain such information. The first source of information should be the website of the selected lender or loan comparison service. This will not only make you aware of all the costs that you will have to incur, but also compare different offers.
Where do you usually find a preparation fee?
Taking a payday loan, you should not be afraid that it will meet with such fees. Not because the law prohibits this kind of payment in payday loans, but because they are costs that would be uncomfortable for loan companies in the long run. This is due to the entry into force of the amendment to the Anti-usury Act, establishing an impassable ceiling on the cost of such loans. Therefore, it is not profitable to include one more fee in them. In such cases, borrowers must prepare only for fixed interest rates of 10% per annum and a commission for granting the loan.