An origination fee is an upfront charge lenders may apply when you take out a loan. Understanding how origination fees work can help you compare loan offers and avoid paying more than necessary.
Origination fees are meant to cover the cost of processing a loan. This can include underwriting, administrative work, and lender overhead.
Most origination fees are charged as a percentage of the loan amount, typically ranging from 1% to 8%. Some lenders deduct the fee from the loan proceeds, while others require payment upfront.
Not all loans include origination fees. Some lenders advertise no-origination-fee loans but may compensate with higher interest rates.
Origination fees increase the true cost of borrowing. Comparing loans using APR instead of just interest rate helps account for these fees.
Use our personal loan calculator to estimate your total loan cost and see how origination fees impact your payments.
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