When goods or services are being purchased through a loan or bdo credit cards, the borrower or debtor needs to understand that the purchase involves the use of someone else’s money other than the buyer’s money.
In these cases, the lender may impose usury charges and late charge fees to the borrower to cover the cost of using the money which the lender may earn through a different mode of investment. There may be cases where an online loan or credit may involve other fees but we will try to focus on these two charges which are the most common charges that are charged on borrowing money.
- Usury Rates – these are rates that are charged on loans. They are also referred to as interest rates. These rates are earnings received by the lender as a form of payment on the use of the money that is being extended to the borrower. The concept of charging usury rates is that a lender can invest the money in some other mode of investment rather than lending it. But the fact that a lender has provided a borrower to use the money, usury rates are applied to the borrowed money that will cover the amount that a lender could have earned if the money were placed under investments. These usury rates are usually unreasonably high unless a law has been passed to control these rates.
- Late Charges – these charges on the other hand are penalties applied by a lender when a debtor makes payments beyond the agreed due date. When a debtor makes late payments to a personal loan philippines or credit, the lending company‘s cost of granting a salary loan may become unreasonably high. To cover the costs that are being incurred by the lender for buyer’s default, the lender reverts to applying late charges to fees that are due. It is possible that other penalties may be applied for multiple default payments such as the entire loan becoming due.
These charges imposed by a lender to a borrower ensures that any cost incurred by the lender is covered. It is a form of payment that a lender imposes on a borrower to ensure that the lender is earning from the use of their money.