An Arrangement Fee is an administration charge made by lenders for arranging credit – usually for a mortgage or for a business loan and sometimes for car finance.
Under the Consumer Credit Act 1974, an Arrangement Fee must be quoted in your written offer of credit and in your Credit Agreement. Not all lenders charge an Arrangement Fee.
The size of an Arrangement Fee can vary from a couple of hundred pounds up to 1% of the mortgage value, which can be a sizable sum. Nowadays, if you require a fixed rate or discounted mortgage you will probably have to pay an Arrangement Fee. /p>
Arrangement Fees can be genuine, but some are charged by fraudsters who claim to be able to find credit for you. Generally, if you are asked to pay an Arrangement Fee upfront, think really hard. Most Arrangement Fees are deducted from the loan or mortgage itself, and this makes sure that you get what you paid for.
The Arrangement Fee is intended to cover the administrative costs of setting up the credit facility.
You should look very carefully at any conditions associated with the Arrangement Fee. Some lenders expect you to pay the Arrangement Fee when you submit your mortgage application (which might well not be refundable). Other lenders add the Arrangement Fee to the loan, which means that you will be paying more interest.
Watch out for certain mortgage lenders who offer low interest rate loans coupled with high Arrangement Fees in an attempt to obtain more favourable ratings in mortgage comparison tables.