First of all, it should be clarified what is meant by additional costs for a loan. The website www.sofortkreditoesterreich.at describes it as “All costs that a loan incurs, such as the processing fee or expenses.” If you look closely, every borrower has noticed that the bound debit interest rate of his loan differs from the effective interest rate. As a rule, this is explained by the fact that fees are charged for processing a credit request and for approval. The effective interest rate contains these fees and is therefore higher than the borrowing rate. So that the cost of the loan remains manageable, you should choose financing with a low effective interest rate. But what additional costs can the bank actually calculate for a loan? And what can you do as a borrower to keep it as low as possible?
What fees does the borrower have to expect?
Before you take out a loan, you should find out which additional costs can arise in principle. Incidentally, it basically makes little difference whether you take out financing from a branch bank and seek comprehensive advice there, or whether you take out the loan from an online bank. In principle, all banks charge ancillary credit costs in some form. They are an important reason why the committed borrowing rate differs from the annual percentage rate. The connection applies that the ancillary costs are lower the less the effective interest differs from the borrowing rate. The additional costs of a loan with a borrowing rate of three percent and an effective interest rate of 4.5 percent per year are therefore higher than with financing with a borrowing rate of three percent and an effective interest rate of four percent.
Typical additional costs are processing fees for drawing up the contract, for maintaining the customer account and for residual debt insurance. Anyone who takes out construction financing must expect fees for the preparation of an expert report for entry in the land register and for the appointment of the notary. According to the pricing regulation – briefly referred to as PangV – all ancillary costs must be listed in the loan agreement. It is important to pay attention to a detailed and understandable presentation. The borrower can influence some additional costs and thereby reduce them. For this reason alone, a careful comparison of the interest rates is worthwhile before concluding the contract. The basic principle is that the fees for an installment loan should be between 0.5 percent and two percent. If they are higher, it is worth asking consumer protection, because a bank may not charge fees that are too high or non-transparent.
What fees are no longer allowed?
Regardless of residual debt insurance, special repayments, costs for partial payments and commissions, two cost factors are of particular importance: the processing fees and the account management fees. Both fees are no longer permitted in new loan agreements. For example, since 2014 it has no longer been allowed to charge processing fees from a borrower. If a corresponding item is listed in a loan agreement, the borrower can request that it be removed. This is because, according to the current opinion of the courts, it is not permissible for a bank to charge a fee for processing loans. This decision was based on the fact that one of the primary tasks of a credit institution is to process and approve loan applications. Therefore no additional fee may be charged.
The management of the credit account must also not be charged. As a guide, the bank may only charge additional costs that result in a service for the customer. On the other hand, no fees may be charged for a service that is only used to reduce the internal administrative effort. By the way, credit inquiries must also be offered free of charge. Accordingly, costs are not permitted if no loan agreement is concluded at all, but only if an inquiry is created.
How can a borrower reduce the ancillary costs?
Not all fees can be avoided completely. Still, there are some ways to cut costs by focusing on key benefits and comparing interest rates.
Extras cost additional money
High fees arise especially when a borrower has special requirements. A residual debt insurance is useful, for example, with a high financing amount or with a long term. But it also costs money, and the fees make up a significant amount. Special repayments also make sense because each unscheduled repayment reduces the remaining debt. Nevertheless, you have to expect an interest surcharge for special and total repayments. If you want to make a change to the contract during the credit period, you have to factor in additional fees. Every bank can pay well for suspension of repayments or changes in repayments. If possible, you should make sure to negotiate flexible terms when entering into the contract.
Favorable fees by comparison
If you want to save costs, you have to compare the interest rates. Both the nominal as well as the effective interest rates and the conditions of the banks differ enormously. With the help of a comparison calculator, you can find the providers with the best interest with little effort. In comparison, you should pay particular attention to the effective interest rates, they are a good indicator of the total costs. If a bank also charges additional fees, these should of course be taken into account in the comparison. Also not to be forgotten are the commissions that some banks charge for arranging loans. Saving a loan without an intermediary saves money.
Online banks score with low costs
A credit comparison usually shows quickly which banks convince with low interest rates. As a guideline, the cost structure of the direct banks is somewhat more attractive than the fees of the branch banks. Online banks do not afford expensive sales and no expensive branches and can therefore offer cheaper. They pass this advantage on to their customers. Therefore, one should pay close attention to the direct banks when comparing interest rates.
Conclusion: Additional costs for loans do not have to be cost drivers
A loan costs money – but the borrower can influence the additional costs. So there is no need to accept what the bank proposes in the contract. On the one hand, it is important to pay attention to the unauthorized additional costs such as the processing and account management fees. On the other hand, one should forego additional services and compare the offers before concluding the contract. As a guideline, the fees for direct and online banks are cheaper than for branch banks. Therefore, every borrower who is interested in low additional costs should check the conditions of the direct banks very carefully. By carefully comparing interest rates and ancillary loan costs, fees can be reduced without sacrificing essential services. In this way, the loan remains flexible, secure and affordable.