Arrangement Fee Size on Large Loan

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MissRibena

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Hi everyone

Sorry the info is so sketchy on this but my parents only tell me things in dribs and drabs and then expect some kind of expert info.

To cut a long story short, my parents had to get a loan for €170,000 in a bit of a panic and are using stock/shares (which I don't really know about because they keep their finances private usually) as security. Now they are asking me why the loan agreement has an arrangement fee of €1270 (approx). The loan is with Ulster Bank - does anyone know if this is normal?

The interest rate is already fairly hefty at 4.85% but as they only expect to have the money for a few weeks they weren't overly concerned about this.

Thanks for any help.
Rebecca
 
Is this a business loan? Even if it isn't, I wouldn't see 0.75% as unreasonable as a fee (for a loan of this size and amount). Lenders are entitled to charge such fees as long as they tell you in advance.

What are their options if they don't want to pay the fee:

(a) Refuse to pay, and see if UB lends anyway?
(b) Approach another lender (who, if not your regular banker, would be unlikely to give you a loan for this amount and term?)

There may be some flexibility on the bank's side, i.e. see if they will accept 0.5%?.
 
Thanks CCovich. No it wasn't a business loan.

They got it down to €1000. I don't think they begrudged the bank the charge particularly, just felt a bit afronted that they had asked what cost would be involved in the loan and were only told about the interest and then this fee appeared on the agreement without a word. They didn't have any option other than to take it as they were only faced with the charge at the 11th hour. They seem a bit more chilled out now in any case.

Thanks again
Rebecca
 
It doesn't look like a percentage, It looks like a flat fee of £1000 that got Euroised.

Does anyone know the status of these charges when it comes to calculating APR?
I would assume that if they were quoted an APR it would have to include this.

I had a similar situation when I bought a car a few years ago. AIB Insisted on receiving my first loan repayment BEFORE they gave me the cash. I did all the maths and they still worked out marginally cheaper than BofI overall so I went with them.

-Rd
 
Banks will get away with what they can. Your parents wouldn't be getting the loan in the first place if they couldn't afford the repayments or provide security so they should be able to get approval elsewere - then they are in a much stronger bargaining position. In my experience it's incredible how flexible banks become when they know there is more than one offer on the table.
 
daltonr said:
It doesn't look like a percentage, It looks like a flat fee of £1000 that got Euroised.
Click to expand...

Yes I saw that, but I was just trying to put it in context of the amount borrowed.

I would have thought that this would have had to included in the APR calculation, as it is a cost of borrowing, i.e. you are only charged if you take out the loan.

Are you sure that AIB wanted a loan repayment and not a documentation fee before they gave you the money? I think that it can be common enough practice for banks to take this out of your first repayment if they don't think you will pay it.
 
Are you sure that AIB wanted a loan repayment and not a documentation fee before they gave you the money? I think that it can be common enough practice for banks to take this out of your first repayment if they don't think you will pay it.
Click to expand...

It was one repayment in advance. I questioned it and they said it was to give them some equity in the Car. They claimed it was standard practice. The other banks didn't do it so I don't know what their definition of standard is.

I pointed out to them that I was effectively borrowing less money from them so their APR figure wasn't accurate (It had a hint of the Credit Union to it).

€20,000 with an up front charge of €600 is the same as borrowing €19,400

When I compared them with borrowing €19,400 from BofI they still came out (marginally) cheaper, so I went with them.

Anyhoooo, the Car is paid for now so I don't care too much.

-Rd
 
Not that it will do an ounce of good but have you emailed IFSRA with this. They'll probably come back with a defence of the bank, but you could post their reply here so we could all have a bit of a laugh.

In fairness to AIB, although their Payment in advance was a bit strange, they did actually still work out cheaper when you did all the maths.

-Rd
 
I recently borrowed €40k from Ulster Bank and they waived the majority of the fee, charged me €30, documentation fee, rather than 1% fee which they said was "normal" ("normal" meaning when they can get away with it)
I suppose it depends on the branch relationship as I would know them very well

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