What Is a Personal Loan Origination Fee?

A study has shown that the average American has around $155,000 in debt.

Loans can be very helpful when you need some cash, but it’s important to pay them back on time. There can be a range of fees associated with a loan, and it’s important to be aware of all of them. One that many people don’t know much about is origination fees.

So what is an origination fee? Read through this guide to find out.

What Is an Origination Fee?

When taking out a personal loan, the lending company may charge an additional processing fee. This is known as an origination fee.

The size of an origination fee will depend on the size of the personal loan. Most lenders charge between 1% and 8%. A loan of $10,000 for example, is likely to have an origination fee between $100 and $800.

In most situations, this fee isn’t charged directly. Rather, the lender will take it out of the total loan amount. As such, in the example above, rather than receiving $10,000 and having to pay back the additional $100-$800, you will simply receive $9,200-$9,900.

Because this money is taken out of the loan amount, you’ll need to factor it in to ensure you actually get the money that you need. You can calculate this by dividing the amount you need by the total percentage without the origination fee percentage.

So with this example, if the lender charges 4% for their origination fees, you’ll need to divide $10,000 by 96% (or 0.96). You can request that the lender increase the loan to cover the origination fee. In this case, it would bring the total loan to $10,417.

How an Origination Fee Determined

This is determined by each lender individually. There’s a range of factors that will influence how much an origination fee will be, such as:

• The size of the loan
• The loan duration
• Your credit score
• If you have a co-signer
• The reason for your loan

Having a high credit score, for example, will not only help you to qualify for a loan, but it will also help to keep the origination fee down.

Is a Personal Loan Origination Fee Worth It?

In an ideal world, all loan offers would come without an origination fee. When you get a loan, you’ll already need to pay back interest, so the idea of paying more money is never ideal – especially when the origination fee is charged upfront.

Ultimately, it’s down to you to determine whether or not it’s worth paying the origination fee. There’s a range of factors that you can use to help you decide.

The APR

The APR (annual percentage rate) is the interest rate that lenders charge each year. These vary depending on the lender and can include various additional fees. Sometimes this also includes the origination fee.

Before you take out a loan, you should calculate how much you’ll be paying back. Make sure you know whether the APR includes the origination fee or not so that you can get a more accurate idea of how much you’ll be repaying.

The Loan Duration

In most cases, the origination fee is paid upfront, but sometimes it’s included in the monthly repayments. You can factor in the fee to determine how much you’re repaying based on the length of a loan.

A $300 origination fee for a 3-year loan, for example, would be $100 a year. For the same loan across 2 years, you would be paying $150 a year.

By taking this perspective, you may have an easier time deciding whether it’s worth increasing the repayment period of your loan so that it equates to less each year. This also gives you more time to ensure you can cover the repayment.

Online Loans

Some lenders charge origination fees, and some don’t. It’s worth noting that loans which don’t have an origination fee are generally only obtainable by people who have a very good credit score. If you do, then you might be able to get a better deal.

Many people, however, have poor credit scores or none at all. If you fall into this group, you might have a hard time getting a loan at all. Fortunately, recent years have seen an increase in fast cash loans, which are far more accessible.

FastLoanDirect is an example of a great way to do this. We can connect you with a range of lenders to help find the perfect loan for you.

We can provide loans ranging from $100 to $35,000, and in many cases, the money will be in your account within a day of applying. All you need to do is fill out the online application, and we’ll look at various lenders to find something suitable.

While our services are free, there will be various fees applicable to the different lenders. As each lender is different, the fees that come with our loans vary. This is in terms of APR, origination fees, and other fees.

It’s worth taking the time to look at the different options available to you and make comparisons. Think about your needs and situation to determine how much you need and what repayment duration would be best; then you can look at the different costs.

Other Factors to Consider

There are certain factors you should consider when comparing loans. These vary from lender to lender, so it can be worth taking the time to check things out so that you know exactly what you’re getting.

Look-Alike Fees

Some lenders may charge additional fees that look like an origination fee but are something different (such as an application or administrative fee). The Truth in Lending Act dictates that all fees need to be disclosed, so make sure you know exactly what fees you’ll have to pay.

Fixed-Rate vs Variable-Rate

Some interest rates are fixed for the duration of the loan, while others are variable. Know which you’re getting, as with a variable rate, the interest you’re paying may change with time.

Finding the Right Loan

When looking for a loan, it’s important to know how much you’ll be paying back. Make sure you’re aware of the interest rate, origination fee, and any other fees that come with a loan before you apply.

If you need to find a loan quickly, then FastLoanDirect has got you covered. By comparing various lenders, we can help you get cash immediately. Click here to visit our website and get started today.