Beware of loan traps

I don’t think that anyone of us would knowingly fall into a loan trap. But, here lies a difference between a well-informed borrower and an average one. A borrower who has up-to-date information on the UK loan market would never fall for a loan that may later on turn into a loan trap.

Yes, I am talking about hidden charges, loan costs and penalties, PPI (payment protection) charges, etc. Well, do not worry if it’s a new thing to you. I am spreading out this information only for people like you who are oblivious of these things. As a finance professional, I can tell you that many lenders come up with hidden charges once you have signed the loan agreement. Lenders adopt many tactics so that they can charge you more money than you think is due from your side. Sometimes, in case of PPIs, people don’t even realise that they are paying for the services that they never intended to take. Similarly, an early repayment penalty is another way of inflating your loan costs later on. So, be careful about such penalties when taking out secured loans.

Always go through the papers and see if there exists any such clause in the loan agreement. Similarly, arrangement fees, valuation fees (in case of secured loans), etc., can raise the total cost of a loan. You should be aware of these clauses before you finally close the deal with your lender.