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.
We like that LightStream offers competitive APRs, no late or origination fees and long loan term options. But you can't prequalify and the loan minimum may be too high if you only need to borrow a small amount.
- Same-day funding available.
- Loan amounts up to $100,000.
- No origination fee or late fee.
- The minimum loan amount is $5,000.
- Prequalification not available.
- No option to pay your creditors directly.
PenFed is worth considering if you have good-to-excellent credit and want a straightforward personal loan with competitive rates and few fees. We like that you don't have to be a PenFed member to apply — you can join during the application process.
- Approves loans as small as $600.
- Membership available with a $5 deposit in a savings account.
- Can pick up a physical check at a branch.
- Can apply with a co-borrower.
- Maximum loan amount is $50,000.
- Generally need good to excellent credit.
- Most branches are in D.C., Maryland and Virginia.
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*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.
