When a lender lends you the money as a loan it is always against some fees that are charged. This fee maybe called as lenders fees or service fees or interest. Whatever maybe the name assigned to this extra money that you as a borrower have to pay the lender goes to the lending company or person. It is always beneficial to understand the reasons why this transaction fee is attached so you can calculate the least amount payable.

When that emergency arises and one has to pick up a payday loan, the lender charges a service fees. This is basically the price paid for getting the unsecured loan at the earliest. The lender is taking the risk as there are no credit checks for the borrower. The company extends the loan to the borrower against the bank account and salary slip details and the company expects the loan to be paid off within two weeks. Incase due to any reason you cannot pay back the loan in time then the lending company extends the option called “roll over”. This means that the amount payable is extended for a defined period of time and an interest is charged on the said amount.

As per the law the lender is liable to disclose the interest that he or his company is charging and also give a copy of the borrower’s rights if the borrower asks for it. If the borrower has any questions, they must be answered to the borrower’s satisfaction. Usually a professional lender will have qualified customer support executives to cater to the customer queries.

Banks do extend loans to their account holders. They charge different rates on interest depending upon the type of loan. There are short term and long term loans. The short term loans usually carry a higher rate of interest than the long term loans. An account holder can over draw money from his/her account but the fees are much higher that is around $ 34 per transaction. This is a big revenue generator for the bank. The overdraft fees has to be paid immediately so people turn to payday loans as that carries a much smaller fees and a repayment period of usually two weeks. Some banks deduct the transaction fees according to the amount that is borrowed rather than the time for which it is borrowed and may also put a cap on the amount that can be borrowed.

Most of the banks and credit unions do not disclose their charges or service fees or transaction fees to the borrower. If they did so then there would be much competition in the market and the beneficiary would be the borrower. Wells Fargo Bank has entered the business of payday loans, direct deposit advance and many other financial credit services. They do not disclose their 10% service fees on the direct deposit advance. The lenders follow different practices which are not clearly explained to the borrower. The hidden charges are directly borne by the borrower who ends up paying that extra amount and this brings in revenue for the lender. In the hard times when the borrower is hard pressed for money, these ‘extra/hidden’ charges are an additional burden. It is very important for the borrower to understand the fees that the lender charges for various services and try to minimize his/her expenses.