What Are the Fees for a Debt?

Debt is bad enough by itself, but to add insult to injury, debt usually involves fees. These fees increase what you owe, making your debt situation even worse. Often, people don't even know what fees are applicable in their debt situation until it is too late, because they fail to read their credit contracts. To get your debt and related fees back under control, you need to know some basics about what types of fees are assigned and how lenders tack them on.

Fee Types

Lenders charge a plethora of different fees on debts. The most common fee on any debt is interest -- without interest, your creditor couldn't make any money from giving you a loan. Late and over-the-limit fees also are lender favorites. Other fees include costs for starting or closing a credit contract and early termination fees. You also may have fees related to debt if you have to spend money to correct a debt error, or if you need to pay an attorney to represent you if you get sued for what you owe. Most fees related to debt are outlined in your credit contracts.

Fee Amounts

In most cases, fees related to debt are relatively low. For example, a survey by the IndexCreditCards website revealed that, as of 2009, the typical late and over-the-limit fees for credit cards were $0 to $39. Typically, fees will be the equivalent of one month's minimum payment. In some cases, such as if you are substantially late on a mortgage or have to go to court, fees may reach the hundreds or even thousands of dollars.

Debt Fees and the Law

Due to changes in the law, consumers have greater protection against debt fees as of 2011 than in the past. For example, the Credit Card Act prevents credit card companies from charging over-the-limit fees unless you opt to allow them. Another example is in the real estate industry -- as shown by the Reuters website, mortgage lenders now have stricter guidelines about screening applicants in regard to debt-to-income ratios, which makes defaulting and having additional fees less likely.

Although positive changes in debt law are in place, each state still sets its own regulations for debt. This means the maximum amount allowed for fees on debts varies from state to state.

The Benefits of Budgeting and Shopping Around

Sometimes a company charges a person a fee simply because the person hasn't researched her options. For example, one credit card company may charge $50 for every late payment, while another may charge just $10. Shopping around for the best contracts thus has real savings potential, even if you don't change your spending habits. The other major factor that results in lenders charging fees is the lack of a proper budget. Budgeting lets you allot the right amount to your expenditures (including debts) so that lenders can't charge you extra for being late or going over your card limit. You will find that if you track your spending, avoiding these kinds of fees becomes much easier.