Borrowing money makes complete sense for businesses because loans are often favourable to your overall finance position – even if you have the capital available to make the purchase. However, it’s important you understand the lingo and keep an eye out for certain fees and terms to ensure you really are getting the most suitable loan for your needs.
How much does your interest rate matter?
When it comes to considering your options for a loan, we’re conditioned to ask "What’s the interest rate?" Sure, interest rates are important, and borrowers should always consider them when taking out a loan, however, there is more to a loan that interest rates alone.
Fees and charges to look out for
It is important that you look for any hidden fees and charges when applying for loans including monthly and annual fee charges. Whilst these sometimes seem like minimal charges, they can add up to a significant amount. Monthly service fees are put towards the servicing and administration of the loan. If you are under a package home loan with special discounts on interest rates, your lender might charge annual fees.
For example, clients often show us loan quotes with very low interest rates. Upon closer examination of the terms and conditions of the approval, there are usually substantial monthly fees as well as an annual fee. Working back the numbers, the fees and charges usually equated to a substantially higher interest rate than originally quoted.
But wait, there could be more!
Loan application fees should always be taken into consideration when applying for a loan. These fees are associated with the origination cost, linked with underwriting and processing a loan. They may also be called a start-up cost, a set-up fee, or an establishment fee. Loan application fees are paid upfront and usually non-refundable, often starting at around $150.
Application fees are charged at the time of application or upon approval or settlement. They may be a percentage of the loan or a flat fee. The price of fees will vary based on the risk presented to the financier.
Are these fees ever waived?
Sometimes you may be able to negotiate. However, in most cases these fees are not negotiable. Fees charged by the Government for example like stamp and tax service fees, are certainly non-negotiable. Ongoing fees are charged on loans or savings accounts monthly and annually by the financier to maintain the loan which may be open to negotiation with your lender.
Whatever fees or charges a loan attracts, it all adds up to give you your effective rate!
Being selective with your lender is one way to know you’re getting the full picture upfront with no hidden costs. It’s important the debt is going to create value for you and your practice. That’s where Credabl stands out. Our goal is to find the best financial structure for you both for the short and long term. We want to partner with you to achieve success. Give us a call on 1300 27 33 22 to find out how we can assist you or use our contact form or live chat to get in touch with us at any time.
