Personal loans with no fees

What fees do loans normally have?

When you borrow money, you’ll generally need to pay it back with interest. Although you might not think of it as a fee, the interest rate is usually how lenders cover their costs and make a profit.

In the world of personal loans, the key figure that lenders use to promote their products is the “annual percentage rate” (APR). The APR is designed to provide an annual summary of the interest you’ll pay, plus any mandatory fees, and must be calculated by all lenders in the same way. This makes it a handy benchmark for consumers looking to compare loans.

Aside from the interest, the main fees (that won’t be included with no-fee loans but may feature on other personal loans) are:

• Set-up fee. A one-off fee covering the cost of administering a loan. It’s sometimes called an admin fee, loan fee, lender fee or a product fee. If you don’t want to pay this upfront, lenders may simply add this on to your outstanding balance.
• Late payment fees. It’s common for lenders to charge one-off fees to punish late repayments. They’ll also add additional interest. What’s more, late loan repayments will damage your credit score, making it harder for you to obtain loans in the future.
• Early repayment fees. Most lenders will tell you there’s no penalty for paying off their loans early, or for making overpayments. But what many borrowers don’t realise is that they will commonly be charged up to two months’ further interest on any sums paid early. Lenders sometimes bury this information in the small print, and don’t always make it easy to clear the loan early.

If you’re considering a secured loan (that’s where you put up your house as collateral in order to borrow more or to get a better rate), then you’ll normally incur a broker fee too.

How do loans with no fees work?

Personal loans without fees won’t come with a set-up fee. This means the interest rate and the APR will be the same.

However, nearly all of these products still do charge late payment fees. It’s never a good idea to accept a loan where you’re not confident about making the repayments on time. Some will also continue to charge interest on early repayments up to two months beyond the date on which the amounts were paid.

What’s more, lenders tend to up the interest rate on their “no fee” products to make up for the shortfall from not charging a set-up fee. In this case, it could be argued that the administration costs are simply spread over the term of a loan, rather than charged as a one-off fee.

Pros and cons of no-fee loans

How to compare loans with no fees

As well as comparing the “total amount payable” and APR, have a look at the minimum eligibility criteria. It’s no use applying for the product if you don’t meet the criteria.

Consider the late repayment charges, too. These tend to be punitive, plus there will be added interest – and damage to your credit score. It’s unwise to accept any loan unless you’re certain you can meet the repayments.

Common requirements for getting a personal loan with no upfront fees

Common requirements often listed among lenders’ minimum eligibility criteria include:

• You’re over 18 years old
• You have a bank account
• You have proof of employment or regular income
• You agree to go through a credit check

Frequently asked questions

• How will I know the total amount payable?

  The representative APR and total repayable are listed on finder.com’s tables to help you compare deals, though not everyone will be offered the representative rate. Most lenders also have online tools on their website that reveal the total amount payable. This figure will also be confirmed before you complete your application.

• When will I know I’ve been approved for a loan?

  After you’ve completed your application, lenders will run a credit check on you instantly. Most lenders will make an instant decision on the success of your application. It’s common for the money to be transferred into your bank account within 24 hours.

• Which type of loan has the lowest fees?

  Generally, secured loans usually come with “lower” fees compared to unsecured loans largely due to the collateral that you will be borrowing against. However, although this doesn’t mean that they won’t come with fees, it does mean that you could find a secured loan with a lower APR.

Written by

Chris Lilly

Head of publishing

Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio

Chris's expertise

Chris has written 566 Finder guides across topics including:

• Loans & credit cards
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