Have you been shopping around for a secured loan and been quoted what you think is an unnecessarily high fee for arranging the loan?
The secured loan market has grown in recent years and as a result there are a lot of companies now providing loans or brokering loans.
As with any industry with a lot of activity there are likely to be a few companies charging excessive fees but in some cases the fees are understandable and can be broken down.
Secured loans are subject to arrangement fees much like mortgages. A valuation must be made of the property that is going to be used as security.
This needs to be done to make sure an applicant has enough equity in the property, either now or in the future, to cover the cost of repaying the loan. Independent valuers are used who need to be paid for their services.
Part of the secured loan arrangement fee is used to cover the cost of administration. The lender is required to make sure all of the necessary paperwork is in order. Some cases require more administration than others and when this happens a slightly higher fee is often charged.
If an applicant has plenty of equity, a clean credit rating and a good income much less administration is required and the loan can often be processed much more quickly.
If an applicant is required to provide extra proof of income or address, i.e. bank statements or utility bills, then more administration is required by the lender to verify the information.
It is quite normal for people with a poor credit history to pay a higher arrangement fee for a secured loan due to the increased amount of work required to process the paperwork and obtain the necessary information to satisfy a lenders criteria.
If you think the fee you have been quoted is excessive, the first thing to do would be to ask the lender or broker what the fee is for and what it covers.
If you are not happy with the fee the only other option would be to get a second opinion.
The only problem with getting lots of different quotes is that it could mean lots of credit searches against your name. This can have an adverse affect on your credit rating so multiple applications are not advisable.