Fees on loan is one of those things that scares people off borrowing, and some lenders may decide to charge high interest based on factors like urgency of clients need for funds, low credit score or history and likelihood of the principal loan amount. While borrower can not do without paying interest on loans, you may have your loan cost cut down when you do some of the things we will say on this post.
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What is the total loan cost?
Total loan cost involves adding up the entire “Interest fees or any charges” of a particular loan amount with what a borrower has paid earlier and if all they pay for, without extra fees as such application fee or late fees it means their loan contains just interest fees. So to calculate the real total loan cost, you multiply loan amount alongside suming all the fees divided by the number of times you will make repayment for your loan in response to the duration.
Why you should reduce total loan cost?
Sometimes, fee on loans can raise up to quarter of the principal amount borrowed, this is possible when the borrower is not consistent with his loan repayment, possibly no plans or structure put in place so he or she ends up paying more on penalty for late. A client in such situation should look for ways to reduce cost on loans so as not to allow it swallow him up. Other loan cost includes, application fee, payment processing fee, and so on, that is more reason why you should read beforehand loan terms in order to be aware of these fees.
Factors influencing total loan cost?
- Credit Score: a credit score is an essential factor in determining total loan cost as borrowers with good credit score are mostly charge less interest fees than those with poor history.
- Loan terms and amount: how long it takes to clear off a loan alongside the amount you borrowed influence your total loan cost so take note of these two.
- Loan type and economic: we have two type of loans “Secured” and “Unsecured” each with different charge fees and approach which can greatly impact total loan cost.
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How can you reduce your total loan cost
- Make effect plans for loan repayment: They’re no two ways to reduce loan cost other than for you to draw out a sustainable plan for long term loan repayment even when circumstances around you feels unfavorable you will still find yourself meeting up with the payment one way or the other.
- Pay upfront: I will use a scenario to explain this point, let say you borrow $290 for duration of 6weeks, every week you are to pay in $50. Why not consider increasing the initial to $55 every week, wow you’re not just only cutting down cost on your loans, also at the end of the 6weeks you will have something for yourself.
- Try loan consolidation: This method involves putting together several loans into one single loan and pay them off, doing this will help reduce cost that lenders should have charged differently. In fact, borrower can request for a debt consolidation loans to pay those ones he collected earlier without stress.
- Auto payment should be incorporated: Here is a method that works almost all the time, those with successful loan repayment use it and had no difficulty, you should explore as well. This method involves you setting up auto payment via your bank or payment app to have specific amount leaves your account the moment you receive your salary or wages. It’s goes a long way and saves you from thinking twice when funds enter your account.
In conclusion
Reducing cost on loans lies in the hands of the borrower, if he meets up with his loan repayment as agreed upon, everything will works smoothly. Of course no lender will cut down fees after you have already received the funds, instead just play your part well and you’re good to go without attracting extra fees.