In addition to charging interest on personal loans, many lenders add a one-time upfront origination fee to cover the processing of your loan. This nonrefundable fee can be up to 10% of the total and is usually deducted before you receive your loan proceeds.
There are lenders that don't assess an origination fee, especially for borrowers with high credit scores. If your lender isn't one of them (or you don't qualify), ask any potential lender what their fee is before accepting the loan.
What is an origination fee?
An origination fee is a nonrefundable upfront charge that covers the cost of processing your loan once you are approved. It's factored into the Annual Percentage Rate (APR)
An origination fee on a personal loan covers a variety of costs, including:
- Processing your application
- Underwriting process to check your credit score, income and debt-to-income ratio.
- Administrative overhead involved in closing and funding the loan
How much is a personal loan origination fee?
The origination fee on a personal loan is usually 1% to 10% of the total loan amount, although borrowers with bad credit may be charged 12% or higher.
Your credit score, income, debt-to-income ratio, the presence of a co-signer and other factors can impact how much you'll pay.
The fee is deducted before you receive any money. So, if you took out a $15,000 personal loan for car repairs with a 5% origination fee, you'd receive $14,250 after the $750 fee was deducted.
Banks that don't charge an origination fee
Not all banks charge origination fees. Online lenders and credit unions, in particular, may forgo the charge.
You won't pay an origination fee with LightStream or PenFed Federal Credit Union. The two lenders are both on our list of the best personal loans thanks to their competitive APRs and high loan amounts.
LightStream Personal Loans offer low APRs, no fees and the ability to apply online. Its terms are as long as 20 years, or 240 months.
- Same-day funding available through ACH or wire transfer (conditions apply)
- Loan amounts up to $100,000
- No origination fees, no early payoff fees, no late fees
- LightStream plants a tree for every loan
- Requires several years of credit history
- No option to pay your creditors directly
- Not available for student loans or business loans
- No option for pre-approval on website (but pre-qualification is available on some third-party lending platforms)
Credit union membership is available to anyone and low amount offerings are as low as $600.
- Credit union membership available to anyone
- Loans as low as $600
- Can pick up a physical at a branch
- May apply with a co-borrower
- Funds come as a physical check
- Must be a member to get funds (no membership needed to apply)
- Must pay for expedited shipping to get your funds next day
- Maximum loan amount of $50,000
- Late fee of $29
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every personal finance article is based on rigorous reporting by our team of expert writers and editors. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
Money matters — so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox. Sign up here.
Catch up on CNBC Select's in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.
Read more
*Your LightStream loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for the lowest rates.
Rates are quoted with an AutoPay discount that is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply.
Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 7.99% APR over a 3-year term would total 36 payments of $313.32.
