Fees, fees and fees is the way of earning profits in a banking environment. Banks provide huge utility by providing
loans, keeping the money safe etc but put a huge burden on many people in the form of
hidden fees. A proper knowledge about such fees is necessary so that you can at-least reduces these if you are not able to remove them.
Commitment fees
½% - 1% or even more can be charged from a borrower as a commitment fee of lending you the money. It is calculated on the unused amount of credit. This fee has a great effect on the
interest rates of the loan that is left to be repaid.
In a competitive environment among the banks and with a good positive
credit profile you will be able to negotiate these fees. Ask them to either remove these fees form your contract or reduce them by a good factor.
Unanticipated audit expense
Many banks get this written in the contract that they can audit the borrower or can send a bank employee to inspect him. Audit by a bank is necessary to see if the firms operation, collection, inventory and accounting procedures are done right. Sometimes bank will require some private audit by a CPA firm for extending the line of credit. Both of these expenses are high and cost time and money.
Reviewing the Contract for Audits
Contract papers must be reviewed to look for any such audit requirements by a bank. What you can do is that if you find any such requirement you can negotiate to eliminate it or reduce its limit. In this way you might save a lot of money. If negotiations fail then do get these audits capped.
Expiry of or Failure to Get a Rate-lock
Rate lock is common in equipment loans and
mortgage loan. If there is a stable
interest rate then banks may lock the rate on transactions. This lock saves a borrower from adverse interest rate movement before the loan term ends. The rate can be help for about 60 days.
Rate Lock
If you are opting for a fixed rate loan then you ask the bank for the rate lock. This may get you a little higher interest rate but it will save you from dealing with a severe interest rate movement.
After the rate lock has been achieved you must try to stay in the holding period for the transaction closing period. If you don’t do this the bank will increase the interest rate with most eager.
Hidden charges can be reduced or eliminated
The bank hidden fees and other charges are put into your contract and you never know about them until you start paying. These fees can be eliminated or reduced by negotiations. The strongest point for negotiations is before you sign the contract. If you sign the loan agreement then your negotiations will not be so fruitful. Carefully read the contract papers and commitment letters to find hidden fees. One good thing to see the fees is to ask the bank to list down all potential fees that can be charged from you in specific cases.