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Fine Print Deceptions and Unsecured Personal Loans
Unsecured personal loans are expensive enough without falling victim to additional costs or hidden fees securely tucked into the fine print. These deceptions can cost a borrower significant sums of money each year. Find out what you should be looking for in the fine print of the unsecured personal loans that you are considering before you sign on the dotted line.
The Many Sides of the APR
The APR of an unsecured personal loan should reflect the total annual cost to the borrower. As opposed to the simple interest rate that is actually charged on the daily balance of the unsecured personal loan, the APR is designed to include all of the fees and charges attached to the debt. However, the advertised APR can vary somewhat from the actual APR that a borrower might obtain. This is simply because the advertised APR is usually based on an estimate for an individual who has perfect credit. For anyone whose credit is not quite so good, the APR is actually going to be a bit higher if not significantly higher in cost.
The High Cost of Prepayment Penalty Fees
Unsecured personal loans can include a prepayment penalty charge that is tucked into the fine print of the loan documentation. Typically, when this type of fee is included, it is expensive. Some lenders include a prepayment penalty fee so that they can recoup the interest charges they will lose should the borrower decide to pay off the loan early. If the fine print for the unsecured personal loan that you are considering includes a prepayment penalty fee, you might want to look for a different lender if the possibility exists that you might prepay the loan.
Do You Really Need Payment Protection?
Today, many lenders are tacking on the "option" of payment protection insurance. A few lenders will include it as a mandatory option while others will simply suggest very strongly that you sign on for payment protection. This type of insurance is designed to make the loan payments for the borrower should he fall into some financial difficulty such as a medical illness or leave of absence from work due to some type of debilitating accident.
In most cases, the borrower doesn't need to take this type of insurance on. It actually protects the lender more than it does the borrower if you think about it. After all, the borrower pays extra money banking on the fact that he'll recoup the benefit when he becomes involved in an accident or takes ill. That type of scenario really doesn't sound very appealing does it?
