Any incidental charge made to borrowers when they take out a solar loan is known as a hidden cost. They are termed hidden fees because you frequently don’t learn about them until after they have been billed, and in other situations, you may not even be aware that you are paying them. 

Even though many hidden fees are only a tiny amount, the total can substantially affect your account if they are charged often. Some unstated costs may significantly affect your loan and harm your finances. 

How do origination fees work? 

When looking for a solar loan, origination fees, sometimes referred to as dealer fees, are likely the riskiest hidden costs. 

The origination fee, often calculated as a percentage of the total amount borrowed, is used by lenders to defray processing costs. For traditional loans, origination costs typically fall between 1% and 5%; however, certain solar loan providers may charge origination fees of up to 30%. 

The fact that many borrowers are unaware of the amount they will be charged until after the loan has been granted makes this a deceptive and frequently exploitative fee. 

To put this into perspective, consider that they may add an origination cost of $6,000 to a $20,000 solar loan. In contrast, the origination cost for a conventional $20,000 bank loan would be $200 to $1,000. 

Lenders employ origination fees to lower their risk and boost profits. In addition, they can promote a lower interest rate without suffering a financial loss by incorporating origination costs with their loan selections. Then, solar finance providers might deceive clients into signing a deal that is less advantageous than it initially seemed. 

For instance, if you take up a $20,000, five-year solar loan that is represented as having “zero interest” but has a 30% origination charge, you will have to pay back more money than if the loan had a 10% interest rate. 

Always read the small print of any loan application since some solar loan companies charge such high origination costs. A more conventional bank loan can be a better choice if you want greater openness.

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