In rare cases, banks charge an additional processing fee, which must be paid by the borrower, as well as the interest charge and the repayment itself. As a result, such fees increase the overall cost of the loan without benefiting the borrower.
A processing fee is not always due, which is why a loan without processing costs is of course offered at various banks. These loans or the banks they issue do not charge a processing fee, which in some cases at least slightly reduces the total amount that has to be repaid. If there is a processing fee, it must never be paid in advance at reputable credit institutions. It is either charged over the entire term or paid in full at the final installment.
Nevertheless, there is of course no reasonable reason for borrowers to choose a bank that charges an additional fee, although there are enough alternatives that completely dispense with additional fees and only charge the interest burden as an additional cost factor. A loan without processing costs does not differ in its details and modalities from a loan with processing costs, because here too, at least in the case of the classic installment loan, the total amount plus the interest burden must be paid in part (installments) within the prescribed term. With a loan comparison, the prospective borrower quickly gets an overview of which providers waive the fee and which bank provides the cheapest loans for their own purposes.
Use comparison and keep your eyes open
As with any prospective contract, the credit contract should of course be kept open to avoid cost traps. Again, it is advisable to use a well-known credit comparison, as this clearly shows all possible cost factors to the borrower and the use of reputable comparisons is also completely free and non-binding. This means that a loan can be found in no time at all without processing costs, without the borrower having to raise additional funds or having to carry out lengthy self-research online.
Borrower should actually accept the processing
The only exception where a borrower should actually accept the processing costs is if the loan is even cheaper than alternative loans despite these additional fees. This occurs when there is a fee for processing the loan application, but the interest burden is significantly lower than that of the competition. Nevertheless, here too, the costs for reputable providers never accrue in advance – they only become due, if at all, when the loan has been approved and paid out.
If a decision is made in favor of a loan without processing costs, this circumstance becomes obsolete anyway, since the borrower then simply pays the installments due, consisting of repayment and interest charges, and these are generally numbered very evenly. In this case, only the final rate can be slightly higher or lower than previous rates.