Beware hidden fees: Understanding payday loan agreements

29.05.2024 - 13:03 / traveldailynews.com / Apollonas Kritikos

Below we’ll explain what kinds of hidden fees to watch out for and how to under the agreement more clearly. 

If you need to borrow money quickly, a popular option that offers same-day cash is payday loans. Having evolved over the years thanks to more regulation from the Financial Conduct Authority (FCA) to protect borrowers and ensure responsible lending practices are followed, these short-term options can be affordable in the right circumstances. However, as not all lenders are equal, some may charge fees that are hidden within the agreement.

When considering  payday loans as a suitable option to cover unexpected expenses, you’ll want to ensure you understand what fees are charged and not have any hidden surprises. It’s better to be fully informed about the agreement before signing than later on. To help, below we’ll explain what kinds of hidden fees to watch out for and how to under the agreement more clearly. 

Understanding the fees associated with payday loans

Like any loan, there will be additions to consider on top of the amount you want to borrow. Along with the interest charge, some lenders will charge fees for various things, however not all lenders will do so. This is why it’s important to compare your options so that you have a good idea of what fees to expect. If you are using an FCA-approved lender, this should all be transparent and easy to see so that you don’t need to look too hard to find them.

The FCA introduced a price cap back in 2015 that protects borrowers from having excessive charges, this includes:

The types of fees that you may see on an agreement will vary, but these can include the following:

As mentioned, this will vary between short-term lenders, and some may not be clear unless you read the terms and conditions fully. Each of these fees can quickly accumulate if you get into problems with repayment alongside the interest charge. Be aware of lenders that ask for a fee upfront before offering you a loan too – this could be a scam, so check if the lender is FCA registered first.

Tips for reading and understanding loan agreements

When reviewing your credit agreement, it’s crucial to read every detail carefully. It can be all too easy to skip this when you need money quickly, but you want to ensure you’re making an informed decision rather than a rushed one.

Pay special attention to the interest rate, all fees including any hidden charges, and the repayment terms. Some lenders won’t charge any hidden fees, making these clear from the outset so it is easier for you to understand before signing. Don’t hesitate to ask the lender for clarification on any unclear terms.

Understanding your agreement can protect you from unexpected costs and ensure that you are