Many consumers may not know or remember that there are other costs to a loan than just the interest rate. One of these costs is the loan account management fee or the billing fee.
An account management fee or billing fee is charged each month in connection with the repayment of the loan as a payment for maintaining the account or billing. This is usually a fixed amount of money that is not affected by the amount of the loan. This monthly service charge is important to consider when applying for a loan, for example a low nominal interest rate on a loan can mean high service charges for the consumer. These service charges may also include expenses such as the withdrawal commission or the cost of establishing the loan.
Total cost of the loan
One way to measure the total cost of a loan is the effective annual interest rate. The annual percentage rate of charge represents the effective interest rate of the loan, plus any charges. The current APR works well for loan comparisons, but sometimes it may be easier for the consumer to perceive the cost of a loan in euros rather than a percentage. This is why it is important for the consumer to understand all the different expenses that can be included in a loan.
As a regular monthly expense, account management fees and service charges can make up a very large part of the cost of a loan. This is especially dangerous when the loan amount is small or the loan period is long. For example, a monthly loan cost of EUR 12 is EUR 144 per year and EUR 520 for five years. Sometimes account management fees may also cost more than the total cost of the loan.
Comparison of loan account management fees and billing fees
We have listed the monthly account management fees and billing fees of our comparison lenders in the table below.
The table shows that there are many variations in account management or billing costs.
At best, the loan can be obtained at no monthly cost. However, it should be noted that the service charge may be included in the nominal interest rate, which may be quite high.
Most loan providers charge a fixed monthly fee
But Good Finance and the Lender charge a percentage of the loan amount. In this case, the monthly amount payable on the loan will remain the same in relation to the loan amount. For smaller loans this can be an advantage as the high and fixed monthly cost can be the most expensive part of the loan.
When comparing and selecting loans, the most important thing to consider is the total cost of the loan. Monthly service charges or nominal interest rates do not tell the whole story. However, it is important for the consumer to know what the loan costs are all about.