Hidden Bank Loan Charges That Would Make a Pick-Pocket Envious

 By George Parker

There can be more to a bank business loan than making interest and principal payments. Your firm may get a great rate on its new credit line or term loan but you may cry on the way home when you discover the hidden fees and charges.
Even seasoned borrowers can be caught off guard. Borrowing costs can be boosted by thousands of dollars and the effective rate on the loan increased by many basis points as a result of these hidden charges.
Here are some of the fees and charges that can increase your firm's costs on bank loans:
Commitment fees
Many banks charge commitment fees of ½% - 1% or more to issue a commitment to lend money. The fee is calculated on the available credit amount. Commitment fees significantly increase the effective rate on outstanding loans.
These fees can be negotiated. If your firm has a strong credit profile or if the competition among banks in your area is fierce, ask for a lower commitment fee or ask to have it waived.
Non-use fees
These fees may be charged in lieu of or in addition to commitment fees. Non-use fees usually range from ¼% to ½% of the unused credit facility. Although these fees are less onerous than commitment fees, they also increase the effective borrowing rate.
As with a commitment fee, you may be able to get the non-use fee reduced or waived if your firm has a strong credit profile or if the banking environment is very competitive.
Restructuring fees
When your firm has reason to restructure an existing loan, you can expect your bank to charge a restructuring fee for the privilege. For example, if your company has reason to convert a short-term loan into a long-term one, it will probably be charged for this restructure.
These fees can range from ½% to 2% or more plus any bank legal fees or out-of-pocket expenses. If your firm has been a long-term bank customer in good standing, you may be able to negotiate or eliminate the fee. But don't expect to eliminate the bank's attorney fees and out-of-pocket expenses.
Bank attorney fees
Attorney fees usually come into play when the bank uses an outside law firm. Making matters worse, many outside bank attorneys require a borrower to hire an outside attorney to issue an opinion letter covering the transaction.
Usually, only the strongest borrowers in very competitive banking situations can totally eliminate paying bank attorney fees. However, if your firm is a valued customer, your bank may be willing to have these fees capped or reduced. Often banks have some leverage with their law firms to get a discount.
Appraisal/environmental evaluation fees
These fees are charged on many asset-backed loans. They usually involve bringing in an outside expert to evaluate equipment or real estate. These fees can be significant, depending on the type of appraisal or environment issue.
Like attorney fees, appraisal or environment evaluation fees are almost always for the account of the borrower. Perhaps the best result one can expect is to have these fees capped or have the lender split the amount in some way.
Unanticipated audit expense
Many banks reserve the right to audit borrowers or to send bank personnel in for inspections. An audit may be required to review accounting procedures or to monitor collections, inventory or another aspect of your firm's operation. Also, some banks require outside audits by CPA firms in connection with extending credit. Any of these scenarios can create significant expense and involve a substantial time commitment for your firm.
Before signing, review your loan agreement carefully to identify any audit or bank inspection requirement. If your bank requires an audit or inspection that you did not anticipate, try to get it eliminated or try to negotiate limits. You may be able to get a less-stringent requirement or to negotiate a less-expensive alternative to the audit or inspection required by your bank.
If all else fails, try to get audit or inspection fees capped.
Late charges
Charges for making late payments to your bank are generally in your control. These charges can be onerous and can add significantly to your firm's borrowing cost. It is not unusual to see banks tack 300 basis points onto a customer's borrowing rate for delinquent payments.
While it is worthwhile during the negotiating stage of the loan to ask for a lower late- payment charge, the best solution is to try to avoid these charges. If you can, try to get the late-payment rate knocked down to 75 to 150 basis points above your borrowing rate.
Expiry of or Failure to Get a Rate-lock
In a stable rate environment, many banks are willing to lock the rate on fixed-rate credit transactions. Rate-locks protect the borrower from adverse rate movements prior to closing. In most cases, rates can be held up to 60 days. Rate-locks are not uncommon in real estate loans and equipment installment loans.
If your firm is negotiating a fixed-rate loan, try to negotiate a rate-lock. You may pay loan interest that is a tad higher, but a locked rate can eliminate an unpleasant interest rate swing.
Once you have locked the rate, try to stay within the holding period for closing the transaction. Most banks will eagerly and aggressively pass on rate hikes in a rising rate market, if you fail to comply.
Many hidden bank fees and charges can be reduced or eliminated if you plan ahead and are prepared to negotiate. You are in your strongest negotiating position before your bank issues a commitment letter and before you sign the credit agreement. Always read commitment letters and loan agreements carefully. Look for hidden fees, hidden charges and unexpected requirements. You can also ask your bank to prepare a separate list highlighting all potential fees and charges.

George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. (“LTI”). He is responsible for overseeing the company's marketing and financing efforts. One of the co-founders of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing.
Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at http://www.ltileasing.com

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Limit on Fees a Bank May Charge - 5 Tips on Avoiding Overdraft Fees

By Robbie T. James

Many people feel strongly that bank fees have gotten out of control over the past few years. And, there are hard facts to back up this claim. Take overdraft fees, for example. Currently, banks bring in over $30 billion per year in the United States alone in overdraft fees. Some consider this highly unfair, but it is all perfectly legal.

You see, the vast majority of bank customers who sign up for a checking account are automatically enrolled in overdraft protection programs. These programs are opt-out, which is marketing speak for "if you do not say you do not want to be enrolled, you are automatically enrolled." And, many banks give preferential treatment to people who enroll in their overdraft protection programs.

Besides, what could be so bad about enrolling in overdraft protection, right? After all, aren't the programs designed to protect consumers from bouncing checks or getting rejected at merchants when trying to run a debit card for a purchase? Well, yes. But, the programs are actually set up to heavily favor the banks in making a lot of money in fees.

How Overdraft Protection Works

Overdraft protection programs work by covering any outstanding charge made by an individual, even if their checking account balance would not normally cover the charge due to non-sufficient funds (NSF).

These programs "protect" the customer by not bouncing checks or rejecting debit or credit charges. But, they actually are set up to make huge amounts of money in fees. Most banks now charge $30 to $35 per overdraft. And, since they allow debit card transactions to go through even when the account has a low or negative balance, a person could easily rack up $100 or more in fees in a single day.

Each Bank's Fee Policy is Different

You may be wondering whether there is a legally-enforceable limit on fees a bank may charge. The answer is: no. While banks are regulated by the Federal Reserve, the Fed sets no particular limit to bank fees.

Fortunately, new rules enacted by the Fed and going into effect on July 1, 2010 require banks to change to an opt-in policy (rather than opt-out) for overdraft protection program signup. These rules also prohibit banks from discriminating against customers who do not opt in to these programs.

However, the rules still set no particular limit on the number of times a person may get charged overdraft fees in a single day. And, it is likely that most customers will still sign up for the programs without understanding how costly they can be.

5 Tips on Avoiding Overdraft Fees

Even with the new legislation, consumers will still be paying billions per year in overdraft fees. Here are 5 tips for you to avoid paying overdraft fees:

1. Keep a reserve of at least $200 in your checking account at all times. This is not always practical, but the money pad will help you avoid overdrawing your account.

2. Connect your account to an overdraft savings account. Some banks allow you to set up a backup account. But, you will need to keep money in that account, as well.

3. Check your balance each morning and night. This can get tedious, but at least you will know where your balance stands.

4. Check your balance from your mobile phone whenever you are about to make a purchase. Again, this is not easy to do, but it does the trick.

5. Switch to a bank that does not charge overdraft fees. This is by far the easiest solution. Some banks will allow you to overdraw your account but still will never charge you an overdraft fee. It is worth it to seek out these banks - and it is the only sure-fire way of avoiding these fees in the future.

Follow these 5 tips to avoid paying overdraft fees.

Get a list of no-overdraft-fee banks in your area at: No-Overdraft-Fee Banks.

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No Bank Fee Banks - 7 Tips For Finding the Right One

By Everett Maclachlan

Among these common bank grievances, the one that can hit you most directly in the wallet is the fees. Among these fees, overdraft fees are the most hazardous to your financial health. After all, banks collectively bring in over $25 billion per year in overdraft fees alone. If you are looking to switch in order to find no-bank-fee banks, here are 7 tips for finding the right one:

1. Develop a list of candidate no-overdraft-fee institutions: Start your quest for the perfect bank by creating a list of at least 4-5 candidates. Start your list either in a spreadsheet program or on paper.

2. Make sure it is insured by the FDIC: The first thing you should check about each bank is whether they are FDIC-insured.

3. Ask about their ATM fee policy: You definitely want to choose a bank that has a zero-fee policy when using other banks' ATMs.

4. Pay attention to the impression or vibe you get about the bank from their website: This one is subtle but oh-so-important. Just like people, banks have personalities. Choose a bank that makes you feel good.

5. Determine what other services they offer: Your needs may someday go well beyond checking and savings accounts. Make sure they can fulfill your future banking needs such as loans, as well.

6. Confirm that they offer no-overdraft-fee checking: To capitalize on people's intense dislike of paying overdraft fees, some banks now offer no-overdraft-fee checking. They won't charge you a fee - even if you overdraw your account.

7. Ask about their other fees: Be sure to get a full accounting of their other fees, such as check-writing fees, monthly service fees, etc. before signing up.

Spending 20 or 30 minutes finding the right bank can pay off for your hugely. Your research can translate to finding the ideal, no-bank-fee bank for you.

For a FREE list of no-overdraft-fee banks near you, visit: http://www.Escape-Overdraft-Fees.com/.

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Avoid Bank Fees With a Prepaid Debit Card

By David T. Andrews

Okay, if you have a bank account you know about bank fees. You know what I mean, late fees, overdraft fees, etc. You also know that most of these types of charges sneak up on you and catch you unawares. That's because there are just so darn many fees and it's not in the bank's best interest to make you aware of all of them or how they really work.

The banks job is to maximize revenue and now that most of their revenue comes from fees, that means more fees. And also, the less aware you are of how these costs are actually applied, the more likely you are to run into them. That's all good for the banks.

However, you can avoid a lot of bank fee issues by switching to a prepaid debit card.

Reloadable debit cards come with their own set of fees of course, but they're fewer in number than the bank versions and more straightforward in nature. For instance you won't be charged any overdraft fees on your card because you simply can't spend over your limit. You will be charged every time you reload the card (unless you set up a direct deposit load) and you will be charged a monthly maintenance fee. But these expenses will usually run in the $3.00 to $5.00 range each and won't fluctuate like interest rates or hide in the fine print like various late fees.

You should give one a try. They're easy to get your hands on because they're at most retail stores. And you can just load a small amount of money at first to test them out. If you don't like how they work, you can simply spend the balance out on the card and never reload it again. In other words, you can just walk away from it. They can sure help you avoid all those pesky bank fees.

David T. Andrews is the author/owner of PrepaidDebitCardsOnline.com.

Visit his site to learn more about avoiding bank fees and keeping more of your own money.

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Overdraft Bank Fee Complaints - How to Lodge Them

By Everett Maclachlan

Seeing an overdraft bank fee show up on your bank statement can be a rude awakening. Life these days is already pretty expensive, even for those who try to live frugally and within their means. But having your own bank, whom you were led to believe you should be able to trust, charge you overdraft bank fees is pretty unsettling.

You are not alone. In fact, banks make billions of dollars per year in overdraft fees in the United States alone. Bank fees have become big business. And, as government regulations reign banks in on their often reckless (and some say abusive) practices around credit card issuance, banks are going to be looking even harder than ever for ways to recoup those lost profits by charging - you guessed it - more bank fees.

A Brief History of Overdraft Fees

So why are all of these bank fees being charged?

The overdraft fee crisis in its current form is a relatively recent banking phenomenon, going back only 5 to 10 years. There are two primary causes of the current overdraft fee situation: overdraft protection programs and the invention of the debit card. These two banking instruments actually work hand-in-hand to squeeze more money out of bank customers each year by way of overdraft fees.

Overdraft protection programs work like this: if you overdraw your account by making a charge that is larger than your current balance will cover, your bank will cover the charge for you. Sounds great, right? However, they immediately turn around and charge you a huge fee - often $30 or more - for helping you out. (Some friend, eh?).

Meanwhile, debit cards make it even easier for overdrafts to happen. That is because most banks will never deny a pending debit charge, even when your balance is too low to cover the charge. Instead, banks will just honor the charge and happily collect that hefty overdraft fee.

What does this mean to you? It means you could go out for a full day of shopping on Saturday, not realizing that a big check you had written three months ago and forgotten about had finally been cashed on Friday, putting your account into the red. As you shop, you make three, four, or even five charges against your debit card. And, guess what? Each charge results in an overdraft fee charge to your account. Painful!

How to Lodge Overdraft Bank Fee Complaints

If you have bank fee complaints, here is how to lodge them to the right personnel within your bank:

1. First, open up your bank statement, or print it out from your computer if you check your statements online. Get out a highlighter pen and find the transaction(s) that led to your overdraft. Highlight all of the details, such as merchant name, date, and amount.

2. Build your argument for why you are lodging an overdraft bank fee complaint. Be sure you can answer the question clearly: why should you not have to pay this particular fee?

3. When you contact your bank, be sure to be super-polite. Nobody wants to talk to an angry customer. If you get angry, the bank representative will likely just tell you that the fees are "policy" and try to get off the phone with you. But, if you are polite, things are much more likely to go in your favor.

4. If you don't get the fee reversed during your call, try writing a letter. Sometimes, that will get a better response. Be sure to include photocopies of your bank statement.

Whether or not your complaint results in the successful refund of your overdraft fee, you should also consider switching banks. Some banks never charge overdraft fees, even if you make charges to your account or write checks that result in an overdrawn account. These banks are out there and waiting for more customers who are sick and tired of paying bank fees.

For a FREE list of no-overdraft-fee banks near you, visit: http://www.Escape-Overdraft-Fees.com/.

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New Law on Overdraft Bank Fees

By Everett Maclachlan

The Federal Reserve System - also called the Federal Reserve or the Fed - is the central banking system of the United States. It has a number of unique powers and abilities, including being the only governmental body to print and distribute U.S. paper currency into circulation.

Originally founded in 1910 as a way to provide a system of checks and balances in the financial system and to prevent runs on banks, its roles and responsibilities have evolved over the years. In its current form, the Fed has the ability to influence monetary and credit conditions, regulate banking institutions, and provide financial services to depository institutions.

As an institution that has the ability to regulate banks, the Fed has been paying attention to legislative and consumer demands regarding banks' overdraft fee policies. In this capacity, many people have been wondering about the new law on overdraft bank fees.

In reality, it is technically a new rule rather than a new law. But, in every other way it is just as binding as a law, since banks are required to comply to the regulations set out by the Fed.

A Response to Rising Anger about Overdraft Fees

The new rule was announced on November 12, 2009, but it goes into effect on July 1, 2010. It was created in response to a general sense of anger and frustration among consumers over what some believe are unfair or even predatory overdraft fee policies instituted by most major banks.

What the New Rule Requires

Officially called Regulation E: Electronic Fund Transfers, the new Fed rule sets forth the following requirements of banks:

1. Requires that new bank customers be given the opportunity to opt-in (actively elect) to overdraft protection programs that allow ATM withdrawals and debit charges to be made, even when the account is at a zero balance. (Previously, most programs had been opt-out).

2. The final rule prohibits banks from discriminating against customers who do not opt in to an overdraft protection program.

3. Consumer who do not opt in will still be guaranteed access to the same account terms, conditions, features and pricing as customers who do opt in.

Of course, even with the new rule in place, banks will still continue to make billions of dollars per year in overdraft fees off of consumers. The only solution for customers to avoid these fees altogether is to switch to banks that do not charge overdraft fees - even if an account is overdrawn.

Get a list of no-overdraft-fee banks in your area at: http://www.Squidoo.com/Banks-Without-Overdraft-Fees.

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