No Application Fees or Pre-Payment Penalties

When you’re looking for a loan or a lender there’s nothing quite so wonderful as seeing that sign that says “no application fees or pre-payment penalties.” It means you have a huge freedom both in whether to actually take out the loan and in the manner you repay it. Application fees are what you pay while they work out whether to actually give you a loan or not (sometimes) or charges they make when they actually give you the loan (more often). Not having to pay these means that the cost of the loan itself is of course smaller.

Continue Reading

The second part of that lovely and welcome phrase means that if you are, through some miracle of sound budgeting or an unexpected bonus or pay rise, able to pay off the loan a little faster than you had expected, then you won’t get charged a fee for that privilege.

Welcome as no application fees or pre-payment penalties are, when might you actually expect to see them? Businesses have to make a profit, after all, and nobody is lending you money for the good of their health. If they’re not charging these fees on some types of loans then where are they making their money? Are they charging a higher interest rate? In the case of student loan refinancing and consolidations, no, unexpectedly, they are not. What happens is that the various government agencies pay bounties and fees to the companies that are making those new loans. That’s how, in those special circumstances of student loan refinancing, there is no application fee or pre-payment penalty.