Despite many information campaigns, many borrowers still do not know what the total cost of the loan is. In addition, many of them do not read loan agreements and sign them without realizing how much money they will actually have to give back. We present basic information on the total cost of the cash loan. We explain how much payday pay really costs.
What is the total cost of the loan?
The total cost of the loan is often confused with the total amount of the loan, which is a big mistake and can be a source of later problems. We must remember that the total cost of the loan is much greater than the amount we have obtained. The total cost of the loan is all the fees the lender will charge us in relation to the loan. These include: capital (i.e. the amount we borrow), interest and additional costs, which are the most common source of problems. Borrowers often do not read the loan agreement before it is signed, making them unaware of the costs they will actually have to bear.
Additional costs of loan
Additional costs may vary depending on the loan company in which we decide to pay. According to the law, all of these costs should be included in the loan agreement, so before signing, you should carefully read its content. And what makes up the additional costs of the loan?
- commission for granting the loan,
- loan repayment insurance (collateral for a loan company that reduces the risk of late repayment),
- preparation fee (usually a one-off cost),
- fee for establishing additional collateral (in the case of liabilities for a larger amount, the loan may be secured),
- administrative fee
- application processing fee,
- payment for extension of the repayment date,
- the cost of servicing the customer’s home (for loans with direct cash delivery about the borrower’s home).
Importantly, these items may or may not contribute to the total cost of the loan. Not all loan companies apply each of these fees simultaneously. There are many offers that allow customers to get cash without overpaying. To this end, it is worth looking at loan rankings, where there are favorable loan offers, most often chosen by customers. In addition, there are free loans in which the borrower gives back exactly the amount he borrowed. However, this offer only applies to new clients of the loan company.
The total cost of the loan and APRC
The actual Annual Interest Rate is the total cost of the loan expressed as a percentage on an annual basis. Includes, among others interest, commission, margins, insurance and other additional fees. Comparing the APRC is useful when choosing a loan or other longer liability. However, in the case of payday loans, i.e. short-term loans, it is not a reliable indicator, because payday loans usually involve only one installment being paid off.