When deciding to finance the purchase of a property, investment or other purpose using funds received from the bank, when calculating the total cost of the loan, one should not only take into account the interest calculated on the borrowed amount, but also other fees such as insurance, margin and commission.
What is the commission?
One of the basic fees associated with taking any type of loan is a commission. It is a kind of remuneration charged by the lender for performing certain activities for the client. The commission for granting the loan is calculated once, and its amount depends on the amount of the loan. The commission is a percentage of the loan amount granted, so the higher the loan, the higher the commission.
Commission and installment amount
The loan commission may constitute one separate fee, collected when concluding the loan or included in its total cost and repaid with the monthly installment. Paying commission in installments is a good solution when a one-time repayment is too much for the household budget, but remember that this involves lending it, which increases the total cost of the loan.
What is the loan commission?
The fee for commission is always calculated as a percentage. There are sometimes promotional offers in which the bank gives up the calculation of commissions, however, this usually applies to a very small group of customers or the promotion of other banking products.
When choosing a loan, you should carefully look at the provisions for all additional fees, especially the commission charged in connection with the conclusion of the contract. In some cash loan offers, the amount may reach up to 25% of the amount borrowed, while an exceptionally low or zero commission may be combined with a very high margin and a slightly higher interest rate.
What determines the amount of commission?
Before entering into a loan agreement, some of its terms can be negotiated. These include, among others, commission. The amount of commission is calculated by the lender, however in some cases he may propose or agree to reduce it. The amount of commission may be lower for customers in good financial condition, having a positive credit history, as well as regular or new customers of the institution who decide to set up an account and choose additional products, e.g. a credit card.
Types of credit commissions
The commission for granting the loan is not the only type of commission. Additional charges are the commission charged for examining the loan application, which must be paid before issuing the loan decision, as well as commissions related to subsequent servicing of the loan or change of its terms. These include the commission for early repayment of the loan or the commission for increasing the amount of the loan received or its conversion, as well as the commission for various activities related to servicing of renewable loans, such as increasing the limit or extending the contract. The commission may also be charged in case of problems of the borrower with timely repayment of installments. In this case, the lender may charge a commission for writ and debt collection activities.
Can I get a loan without a commission?
Banks’ commission-free loan offers are rare and are usually offset by increases in other fees. However, financial products from non-bank institutions and loan companies that offer widely advertised fast, commission-free loans are increasingly appearing on the market. They are usually granted even without any other costs, but only for new customers who can borrow a set amount without any additional costs.
If we want to use professional support in calculating the commission amount of a particular bank’s offer, obtain an optimally tailored loan or obtain a competitive consolidation loan for our liabilities, Elliot family Finance specialists will help find a safe solution.