Personal Loans: Hidden Charges That Cost You More Money & Solutions – Kenyans.co.ke

Kenyans have continued to rely on expensive digital and shylock loans, with the cost of living rising daily. 
However, in haste, many assume the hidden charges which affect their budgets and repayment plans.
Central Bank of Kenya (CBK) on Monday, September 19, further published a list of approved Digital Credit Providers to protect borrowers from exploitation. 
The ten lenders were selected from 288 who sought approval. Herein are hidden charges these lenders use to make outrageous profits. 
Processing fees
Some lenders will charge a processing fee before deducting it from the money disbursed.
The fee is termed as an administrative expense, despite being minimal and varies from different lenders.
Often, this fee is non-refundable whether your loan application is approved or not thus, you will end up repaying more than you expected.
Late payment charges
People taking loans tend to ignore the late payment fees on the agreement. Charges vary depending on the lender. You will either be penalized per day or per month.
Cancellation fees
Some lenders charge you if you prematurely cancel a loan application. However, some offer a cancellation window of either 24 hours or 48 hours or lower the interest if the loan is paid within a certain period of time. 
Cancellation fees are common not only in loans but flights or hotel services.
Duplicate documentation fee
Lenders charge extra if you want a copy of the loan balance or any other information concerning the loan. 
Prepayment penalties
This is the fee a debtor pays off the loan before it matures.
If you manage to repay the loan before the allocated time, you will be fined by the lender. When getting a loan, ensure you get an equated monthly Installment (EMI) you can afford.
Tax
Notably, during the loan period, banks offer other services to the customer. The services subsequently attract tax. Another common charge you need to foot is the Standard Goods, and Services Tax (GST) levied on the loan processing fee.
Solutions
Despite the hidden charges, several options exist to avoid repaying more than you expected. 
Read carefully through the loan agreement
The loan application can sometimes be tedious, especially if it is through the bank. Take your time to understand the terms and conditions.
Additionally, it is more important to understand that the oral discussion points between yourself and the lender are on paper.
Conduct intensive research on the lender
To be safe, conduct research on the lender, check reviews from other users, and consult experts. Checking reviews online allows you to make an informed decision when taking up a loan.
A lender with good reviews will be transparent and offer all necessary documents. Avoid random online lenders.
Understand the terms used in the loan agreement.
Some charges or terms on the loan application may have complicated names. Ask the lender to explain the meaning. Also, understand in which situations each charge becomes liable.
Avoid an ambiguous loan application form.

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