The preparation fee covers various costs related to the loan preparation by the financial institution. What determines the amount of the preparation fee and how does it differ from the commission? The customer deciding to incur a liability must take into account the need to incur certain costs, including preparation fee. It is a one-off amount charged by a financial institution for taking actions related to the preparation of a loan. What determines the amount of the preparation fee and how is it different from the commission?
What is the preparation fee?
The preparatory payment, in the simplest terms, is the various costs associated with the loan preparation. I am talking here about checking the creditworthiness of a potential client, paying out money, or transferring them to the borrower. Importantly, the said fee applies to both banks and loan companies. This fee, however, is charged once.
Important – The Consumer Credit Act of May 12, 2011 imposes on lenders an obligation to inform about any non-bank loan costs, including the preparation fee.
What determines the amount of the preparation fee?
The preparation fee depends on many factors and is usually quite high – it can be equal to 1/4 or 1/3 of the loan amount online. Everything depends on the loan amount and the loan period. As the President of the Office of Competition and Consumer Protection. “This fee is calculated at different levels for different loan amounts. In addition, it should be pointed out that the preparation fee for the same loan amounts, but for different repayment periods, is also set at different levels. ”
How can you find out how much is the preparation fee in the institution whose services we are interested in? It is very easy. First of all, we can check it in the company’s loan calculator. In addition, such information should also be included in a special table of fees, which can be found on the website of the lender.
Preparation fee and commission – learn about the differences
Many people are not aware of the differences between the concept of preparation fee and commission. Using these expressions interchangeably is a big mistake.
The commission is a value expressed in per cent, which is paid to the entity for the performance of a specific legal transaction (for example, a loan). In turn, the preparation fee covers all activities that the lender must perform to prepare the commitment. Importantly, the commission, in contrast to the prepayment fee, is refunded in case of cancellation of the loan (each consumer has 14 days to withdraw from the contract).
What is the cost of APY?
Before borrowing, the borrowers should carefully read the costs of the obligation, i.e. APY. Under this concept is the Actual Annual Interest Rate, i.e. the total cost of the loan that the client is required to bear.
The APR consists of, among others:
- loan period,
- amount of liability and type of installments,
- commission for granting a loan,
- capitalization of interest,
- Nominal interest rate on an annual basis, i.e. interest rate,
- additional charges (including administrative fee or the aforementioned preparation fee).
Before taking a loan, analyze your home budget
Before we decide to take a loan, it’s worth analyzing your home budget. In this way, we will find out what the maximum amount of the obligation will not cause us major problems in repayment.
It is worth starting a budget analysis from writing out your income and expenses. I am talking here on fixed expenses (rent for a flat, telephone fee, grocery shopping) and one-off expenses (visit to a hairdresser or a doctor). The next step is to calculate the total amount of the loan, taking into account the commission and the preparation fee. In this way, we will make a commitment tailored to our current capabilities. Thanks to this, we will avoid unnecessary financial problems.