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Personal loan costs explained

From interest rates to origination fees, learn all about the cost of a personal loan.

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There’s a cost for just about everything when it comes to personal finance — and personal loans can be no exception. Fees in addition to your interest can add to the cost of your loan. The good news is that there are lenders who charge no or little fees and you might be able to minimize what you end up paying. Learn about the potential costs of a personal loan, how to avoid unnecessary fees and compare lenders that charge little to no fees.

What is the cost of a personal loan?

The total cost of a personal loan is the combined total of the following:

  • The interest rate on the loan
  • The fees you may be charged when you apply for and open your loan
  • The fees you may be charged when your funds are released
  • The fees you may be charged when you are repaying your loan
  • Any miscellaneous administration fees

Good news

It’s important to note that not all personal loans carry these fees. You can compare lenders that charge little to no fees in our table below. Keep reading to learn about the different kind of fees that can make up the total cost of a personal loan.

Interest and APR explained

The interest rate of your loan is the percentage of your loan balance that you have to pay back in addition to the amount you borrowed. With personal loans, lenders often charge you interest with each scheduled repayment — which is usually once a month. So your monthly repayment actually has two parts: a repayment on your balance (called the principal payment) and an interest payment. As your balance gets lower, the amount in interest decreases since it’s a percentage of that balance.

The APR (annual percentage rate) is your loan’s interest rate combined with your total financing fees expressed as a percentage. Since it’s written as a percentage, it’s easily confused with interest rates — it doesn’t help that when there are no fees, APR and interest are the same.

Most personal loan providers base your APR on the amount you borrow, the time you have to pay back your loan (known as the loan term), your financial history and any fees they charge.

Costs when opening your loan

After you’ve made sure you meet a lender’s credit score and eligibility requirements, your next step to borrowing is filling out an application. Keep an eye out for these potential fees as you move toward signing the loan contract.

Application fee

An application fee typically combines the costs of processing, document preparation and review a bank or lender takes on. It’s a catch-all term for the cost of putting together a loan on your behalf.

Personal loans tend to come with a lower application fee than you’ll see with a mortgage.

  • Application fees are very uncommon among personal lenders. If you find one that charges an application fee, you may want to consider another lender.

Brokerage fee

If you choose to bypass a direct lender and instead apply with a broker or service that connects you with multiple loan offers, you might pay a fee for the convenience. Brokerage fees arise when a broker isn’t making a commission or isn’t paid by the lenders in its network.

Many services that connect you to lenders are free for the applicant, and that includes big brokers like Loans Canada and LoanConnect. If you’re charged a fee, it’s typically a flat fee that you only pay after you’ve applied or accepted a specific loan agreement.

  • Either apply directly with a lender to avoid this fee or find a broker that doesn’t charge the borrower for its services.

Closing fee

A closing fee generally includes a lender’s commission, a brokerage fee and other associated application costs. While this term is typically associated with real estate, you’ll find a few personal lenders that also charge it.

Your closing fee may be rolled into the monthly cost of your loan or taken out of the amount you’re ultimately funded. Either way, you’re looking at no more than a couple hundred dollars.

  • It’s possible to find lenders that don’t charge closing fees. If yours does, you might be able to negotiate it.

Commitment fee

If you apply for a loan that won’t be immediately funded, you might face a commitment fee. Generally, this fee is intended to make up any interest the lender could be charging you on the loan amount.

A commitment fee can be either a flat fee or a fixed percentage of the amount taken out of your disbursed loan amount.

  • Avoid this fee by funding your loan right away rather than delaying disbursement. If you don’t need the money right away, consider applying when you’re ready.

Document preparation fee

Your lender might charge a fee to offset the costs of drafting documents related to processing your loan. This includes the application, your specific terms and any other closing forms.

It is generally a flat fee of $100 or so that’s taken out of your loan before it’s even disbursed.

  • You may be able to find providers that don’t charge a document preparation fee if you want to avoid it.

Processing fee

Similar to document preparation and application fees, processing fees are typically charged by lenders to cover the cost of credit checks and underwriting. They are typically a flat fee taken out of the amount of your loan. You can expect to pay an amount equal to what you’d pay for prep and application fees: around $100.

  • Many lenders don’t charge a processing fee. If yours does, the fee is likely unavoidable. Still, it’s worth trying to negotiate it down or simply choose a different lender.

Paper copy fee

Online lenders sometimes charge borrowers a fee if they request a physical copy of the loan agreement for their records. It’s also an option for borrowers who are uncomfortable using e-signatures on official documents.

If you request paper backup for your documents, you’ll typically pay a fixed $10 per copy.

  • Easily avoid this fee by forgoing a paper copy of your documentation with an online lender or borrowing from a brick-and-mortar lender like a credit union, bank or well-known loan provider. Even if you’ve provided your documents electronically, you can often save them as PDFs and print them out at home.

Underwriting fee

Personal loan underwriters are the people who assess the level of risk a bank or other lender is potentially taking on with a specific borrower. Underwriting fees are designed to cover the cost of that assessment.

You’ll usually see this fee rolled into other fees that include origination, processing or document preparation. It’s generally a flat amount of no more than $100 that comes out of your total funded amount.

  • Not all lenders charge an underwriting fee. Those who do charge this fee may be willing to negotiate it down.

Compare low-no fee personal loans now

Costs when your funds are released

The more crucial part of the process is why you’ve applied with a lender in the first place: to get the money you need to plan your next step in life, consolidate your debt and move on or get over a financial hump. Here’s what to look out for when it’s time for a lender to disburse your funds.

Credit insurance fee

You may be offered credit insurance when you take out a personal loan. This insurance allows you to file a claim to cover repayments you might have missed due to unexpected personal tragedy or hardship.

Credit insurance is typically a monthly payment of a few dollars that’s added to your repayment amount.

  • It’s not necessary to add credit insurance to your loan. If a lender insists that it’s mandatory or tries to include it deceptively, look for a different lender.

Origination fee

Also known as a disbursement or administrative fee, an origination fee can be rolled into the monthly cost of your loan or simply taken out of the amount you’re funded. It’s designed to cover the costs associated with your application process in its entirety.

This fee is typically assessed as a percentage of your loan amount ranging up to 8%.

If your personal loan provider charges an origination fee, it’s likely it will be deducted from the amount you’re ultimately disbursed. As an example, if you’re looking to borrow $10,000 through a loan that comes with a 2% origination fee, that $200 fee is deducted from your $10,000 loan amount, resulting in you receiving $9,800.

Some lenders may tack the fee onto your loan amount instead of deducting it. If you need the exact amount you’re applying for and can’t afford to receive less, check with your lender to see if adding the origination fee to the loan amount is an option.

  • Not all lenders charge an origination fee. If yours does, you probably won’t be able to negotiate it down or avoid it.

Costs when repaying your loan

Even when you’re finally on the path to making repayments, it doesn’t mean you’re free of fees. You could be asked to offset the costs associated with specific payment types and face fees for late or missed repayments.

Cheque handling fee

Also called a cheque processing fee, this fee offsets the cost of your lender having to deal with physical cheques. If a lender charges this fee, it typically charges a fee on each cheque you submit.

Most cheque fees are around $5, which can add up quickly if you’re paying by cheque every month.

  • Make repayments by other means if a lender charges a cheque handling fee. You can usually pay electronically through autopay or direct payments.

Collection agency recovery fee

If you default on your loan, your lender may call on the services of a collection agency to get the payments it’s owed. Many pass along any fees associated with this service to you.

If your lender requires you to cover the costs of hiring a collection agency, you could pay a flat fee or a percentage of the repayment in question. Collection agency recovery fees are generally steep, reaching hundreds of dollars.

  • If you’re worried about missing payments, contact your provider. Your lender may be willing to work out different terms to get you through tough financial times.

Nonsufficient funds (NSF) fee

If your repayment doesn’t go through or is returned for insufficient funds, you’ll likely pay an NSF fee. These fees are called returned cheque, failed payment or returned payment fees.

NSF fees can run $15 or more and are often added to the amount due.

  • To avoid this fee, confirm that you have the funds available in your account when you’re making a payment. If your payment history is otherwise spotless, call your lender to explain your situation — it might be willing to waive the fee.

Electronic payment processing fee

Though a less common fee, you could face an electronic payment processing fee if your lender enforces strict repayment terms. This fee is designed to offset the cost of one-time electronic payments, including payments made by wire transfer.

You’ll usually end up paying an extra $5 for each payment made this way.

  • It’s easy to find lenders that don’t charge this fee. If your lender does, ask if it is willing to waive it for automatic payments from your bank account.

Late payment fee

Most lenders charge a fee when your repayment is received past its due date, though some lenders, like goPeer, offer a grace period before applying any late charges.

Late payment fees are added on to the owed amount as a percentage of the amount due or a flat fee. The percentage generally runs around 5% of your repayment, with flat fees around $15. Sometimes lenders charge the greater or lesser of a percentage or flat fee.

  • Enrolling in automatic payments can help you avoid this fee. If you don’t think you’ll be able to make a payment on time, call your lender as soon as possible. You may be able to work out a plan to avoid any late fees, especially if your payment history is good.

Payment convenience fee

With some lenders, paying by debit or credit card — rather than through direct payments via EFT — can trigger a payment convenience fee. This fee is usually assessed per transaction and added to the typical cost of your repayment.

  • If your terms and conditions indicate that EFT payments are required, you’ll need to follow suit with your repayments or pay this charge.

Prepayment fee (early repayment fee)

It can be exciting to find that you’re able to put more money toward your principal or even pay off your loan before it’s fully due. But you’ll want to be sure that your lender doesn’t charge a prepayment fee, also called an early repayment or exit fee. This fee is intended to cover the interest that your lender would have collected over the life of your loan had you paid it off over the term stated in the contract.

Prepayment fees come as both flat fees and percentages, depending on your lender, and can be steep — sometimes hundreds of dollars.

  • If your contract includes a stipulation against prepayments, simply holding off on extra repayments can help you avoid this fee. But many lenders don’t charge it, which means you might be able to find one matching your needs without worrying about this fee.

Loan administrative fees

Lenders can tack on just about any type of fee by explaining that it is intended to cover the costs of maintaining your loan.

Annual fees

You might see an annual fee tacked onto your loan schedule — often a flat $100 or more added to your account once a year. This fee is designed to take the costs of maintaining your account off of your lender.

  • Not all lenders charge annual fees so it’s easy enough to find a loan without it. If yours does, an annual fee is among those long-term costs you can try to negotiate — especially if you’re paying other forms of administration fees.

Other ongoing administration fees

Administration fees come by many different names: loan service fees, ongoing monthly fees, online connection fees and more.

Like an annual fee, these miscellaneous fees effectively reimburse your lender the costs for maintaining your loan. But “ongoing” implies a monthly fee tacked onto your regular repayments, representing either a percentage of your loan or a flat fee. Paying one or more of these fees each month can put a dent in the amount of your payment that actually goes toward your principal.

  • Carefully read the fee structures that come with your loan to determine just how many you might be paying to your lender. Many of these fees are simply the costs of doing business passed on to you. Call your lender to see if you can negotiate or even drop one altogether.

Compare low-no fee personal loans from online lenders

Name Product Interest Rate Fees Loan Amount Loan Term Link Requirements
Spring Financial Personal Loan
17.99% - 46.96%
No fees except $30 NSF fee
$500 - $15,000
9 - 48 months
Go to site
More Info
Requirements: min. income $1,800/month, 3+ months employed, min. credit score 500
If you're not eligible for an unsecured loan, you may be offered a credit builder loan to help improve your credit score.
LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 5.75%-46.96%
No application, origination or brokerage fees
$500 - $50,000
3 - 120 months
Go to site
More Info
Requirements: currents debts total less than 60% of income, min. credit score 300
Fill out one application with this broker and get pre-approved by different lenders in 5 minutes.
Mogo Personal Loan
9.90% - 46.96%
Non-sufficient funds fee of $20 to $50
$200 - $35,000
6 - 60 months
Go to site
More Info
Requirements: min. income $13,000/year, min. credit score 500
100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
Get a free quote without affecting your credit score and get a loan on the same day. Track your credit score for free.
goPeer Personal Loan
8.00% - 33.92%
Origination fee varies
No application or prepayment fees
$1,000 - $25,000
36 - 60 months
Go to site
More Info
Requirements: recommended income $40,000/year, no payday loan debt, min. credit score 600
Connects creditworthy Canadians looking for a loan with Canadians looking to invest. Apply in minutes and get a response within 24 hours.
SkyCap Financial Personal Loan
12.99% - 39.99%
No fees except $50 NSF fee
$500 - $10,000
9 - 36 months
Go to site
More Info
Requirements: min. income $1,200/month, stable employment, min. credit score 550
Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
Fairstone Unsecured Personal Loan
26.99% - 39.99%
No application, origination or prepayment fees
$500 - $50,000
6 - 60 months
Go to site
More Info
Requirements: min. income $1,000/month, min. credit score 525
Get a free quote without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.
ConsumerCapital Personal Loan
19.99% - 34.99%
$75 origination fee
No application or prepayment fees
$1,500 - $12,500
24 - 60 months
Go to site
More Info
Requirements: min. income $1,900/month, 6+ months employed, no payday loan debt, min. credit score 600
Complete an application in less than 10 minutes and get a decision within 24 hours.
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
No application, origination or brokerage fees
$300 - $50,000
3 - 60 months
Go to site
More Info
Requirements: min. credit score 300
A broker with the largest lender network in Canada. Fill out one application and get matched for free with lenders.
FlexMoney Personal Loan
18.90% - 46.93%
No application, origination or prepayment fees
$500 - $15,000
6 - 60 months
Go to site
More Info
Requirements: min. income $2,000/month, 3+ months employed, min. credit score 500
Apply in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan any time without penalty.
Loan Away Personal Loan
19.90% - 45.90%
No application or origination fees
$1,000 - $5,000
6 - 36 months
Go to site
More Info
Requirements: min. credit score 300
A lender that approves loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
Fairstone Secured Personal Loan
19.99% - 23.99%
Varies by province
$5,000 - $50,000
60 - 120 months
Go to site
More Info
Requirements: must be a homeowner, min. credit score 560
Use your home equity to get a secured loan with flexible repayment options. Get a free quote without impacting your credit score.
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Bottom line

Every personal loan comes with unavoidable fees — but that doesn’t mean you have to accept all of them that come your way.

Even small penalty fees can add hundreds of dollars to the cost of your loan. Look for a lender that charges minimal fees — or none at all. If you’re charged a fee for a loan you’ve already taken out, contact your lender and see if it can be waived or reduced.

When you’re ready to begin comparing your low-no fee loan options, read our reviews of lenders and products to find one that fits exactly what you need.

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