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There’s a fee for just about everything when it comes to personal finance — and personal loans are no exception. When fees are ongoing, they can add hundreds of dollars onto the cost of your loan. And owing more isn’t what you want when you’re borrowing money.
You likely won’t be able to avoid every fee, but you might be able to minimize what you end up paying over the long run.
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 dotted line.
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, but there can still be some pretty high fees. Some lenders may charge up to $100 just to process and underwrite your application.
You typically pay this fee at the time of application, and it’s nonrefundable — even if you’re denied the loan.
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. 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.
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.
If you apply for a loan that won’t be immediately funded, you might face an extra commitment cost. 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.
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.
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.
Online lenders sometimes charge borrowers a fee if it requests 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.
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.
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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 life’s next adventure, consolidate your debt or get over a financial hump. Here’s what to look out for when it’s time for a lender to disburse your funds.
You may be offered credit insurance when you take out a personal loan. This insurance allows you to file a claim to cover payments 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.
Also known as a disbursement or establishment 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 it from the amount you’re ultimately disbursed. Say 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 apply 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.
Even when you’re finally on the path to repayments, it doesn’t mean you’re free of fees. You could be asked to offset the costs associated with specific payment types and the consequences of late or missed payments.
Also called a check processing fee, this fee offsets the cost of your lender having to deal with physical checks. If a lender charges this fee, it typically charges a fee on each check you submit.
Most check fees are around $5, which can add up quickly if you’re paying by check every month.
If you default on your loan, your lender may call on the services of a collection agency to get the payments is’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 your repayment doesn’t go through or is returned for insufficient funds, you’ll likely pay an NSF fee. These fees are called returned check, failed payment or returned payment fees.
NSF fees can run $15 or more and are often added to the amount due.
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.
Many lenders charge a fee when your repayment is received past its due date, though some lenders offer a grace period before applying any late charges.
Late payment fees are added on to the delinquent 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.
With some lenders, paying by debit or credit card — rather than through direct payments via ACH — can trigger a payment convenience fee. This fee is usually assessed per transaction and added to the typical cost of your repayment.
It can be exhilarating to find yourself able to put more 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 exit fee. This fee is intended to cover the interest that your lender would have collected over the life of your loan.
Prepayment fees come as both flat fees and percentages, depending on your lender, and can be steep — sometimes hundreds of dollars.
Lenders can tack on just about any type of fee by explaining that it is intended to cover the costs of maintaining your loan.
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.
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 on to 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.
Lender | Prepayment | Late payment | Origination | Check processing | Nonsufficient funds | |
---|---|---|---|---|---|---|
Prosper | None | $15 or 5% of monthly payment amount, whichever is greater, if you haven’t paid the full amount of your monthly payment within 15 calendar days after your due date. | Varies between 1% to 5% of loan amount. Deducted from the amount of money you receive. | This fee is the lesser of 5% of your payment or $5. | $15 for each returned or failed payment. | Learn more |
Upgrade | None | $10 per payment if you don’t pay the full amount of your payment within 15 calendar days. | This fee may vary between 1% to 6%, which is deducted from the loan proceeds. | None | $10 for each returned or failed payment. | Learn more |
LendingClub | None | $15 or 5% of monthly payment amount, whichever is greater, if you haven’t paid the full amount of your monthly payment within 15 calendar days after your due date. Charged for each late payment. | The fee may vary between 1% to 6% but is charges with your loan. This means that you will receive the amount you applied minus the origination fee. | $7 dollars per each payment made by check. | $10. This is taken as a late fee. | Learn more |
Best Egg | None | $15 if you’re late by 3 calendar days. | 0.99% to 5.99% deducted from loan proceeds. | None | $15 for each returned or failed payment. | Learn more |
FreedomPlus | None | $15 or 5% of monthly payment amount, whichever is greater, if you’re late within 10 calendar days. Charged for every late payment. | 0% to 5%, typically deducted from loan amount before borrower receives it. | $15 dollars per each payment made by check. | $15 for each returned or failed payment. | Learn more |
LaurelRoad | None | None | None | None | None | Learn more |
LendingPoint | None | Not listed | 6%, added onto loan amount. You have the option of having it deducted prior to deposit. | None | Not listed | Learn more |
NetCredit | None | No fee unless your state law requires it. | No fee unless your state law requires it. | No fee unless your state law requires it. | None. | Learn more |
SoFi | None | None | None | None | None | Learn more |
LightStream | None | None | None | None | None | Learn more |
Every personal loan comes with unavoidable fees. But that doesn’t mean you have to accept all of them that come your way when borrowing from a lender.
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 options, read our reviews of lenders and products to find one that fits exactly what you need.
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I am from Algeria applying for a loan but I am searching for a lender that can deduct charges from the amount loan applied.
Hello Ketef,
Thank you for your comment.
I understand that you’re looking for a personal loan however the loan products that are featured on our pages are offered for U.S. residents and citizens only. You would be best to check options from your local lenders.
Should you wish to have real-time answers to your questions, try our chat box on the lower right corner of our page.
Regards,
Jhezelyn