You may be thinking:
This all sounds too good to be true… How much is it going to cost me?
Keep in mind, interest and fees vary depending on the lender you choose to borrow from and your credit history.
Poor credit will stick you with higher interest and fees.
Besides interest, other costs to consider when shopping for a personal loan include origination fees and other small expenses hidden in the fine print.
Let’s talk about these costs in detail:
Loan Origination Fees
A lender may charge an origination fee to process your loan.
The origination fee can be subtracted from the loan amount before you get the lump sum.
Your credit history is used to determine your origination fee amount, it can range anywhere from 0.99% to 6%.
For example, say you apply and get approved for a $10,000 loan.
If the origination fee is 2%, you’ll pay $200 for the origination fee.
The fee of $200 will be subtracted from your loan, and you’ll get $9,800 deposited into your account.
Be sure to factor in the origination fee when deciding how much to borrow since it can take a chunk out of the money you receive.
Learn more about Why Personal Credit Still Matters for Business
Other Hidden Fees
Small print costs on small business personal loans are usually minimal.
In any case, read through your loan contract carefully before signing on the dotted line to avoid an unpleasant surprise down the road.
Lenders may charge a fee if you pay late or make a payment that’s returned for insufficient funds, for example.
A responsible borrower will understand the costs and implications if something unexpected happens.
Another small print fee to know about is a prepayment penalty.
Prepayment penalties are fairly uncommon for personal loans, but it’s an extra cost you’d probably want to know about ahead of time.
A flat fee or percentage prepayment penalty may be charged by a lender if you make advanced payments or pay a loan off completely before the repayment term ends.
Say you’re lucky enough to experience a cash windfall that can repay the entire debt:
It’s still going to cost you if the loan contract includes a prepayment penalty.
Alternative lenders that operate primarily online have exploded onto the scene offering loan products with limited fees across the board.
It’s possible to find a personal loan for your business with no origination fee, low fine print fees, and no prepayment penalty—
If you do your due diligence, that is.
Learn more about The Best Banks for Small Business Loans May Not Be Banks At All