Most loans and financial products are infamous for various fees. If you have been shopping around for a personal loan, you have probably come across the term “Origination Fee”. This fee is included in your annual percentage rate and serves often times as a commission for the loan agent. Origination fees are in fact included in your APR, but not the interest rate of your loan.
In order to understand origination fees, let’s understand a bit more about interest and APR. The interest rate on a loan is the cost to borrow that principal amount of money and is always expressed as a percentage. APR is short for annual percentage rate, and it includes interest along with other fees, including the origination fee. Thanks to the Truth in Lending Act, all lenders of any shape or form are required to disclose their APR clearly.
Origination fees are charged to you by your lender as a way to cover the expenses of entering into a loan agreement. This could include any paperwork fees, commissions, and other expenses related to giving you the loan. The origination fee is almost always expressed as a percentage. The percentage of your fee can vary depending on your credit and where you got the loan. Typically, we see that most online loan providers charge an origination fee as well.
When it comes to origination fees, the amount of the fee can vary due to many factors. Although some lenders do not charge an origination fee, this is becoming harder to find. Depending on the state you live in, your credit, and your lender, the origination fee can range from $0 to 8% of the loan with some lenders.
While some lenders do not charge an origination fee directly, you are almost always paying some sort of fee. All lenders and banks are businesses and have operating expenses tied to those businesses. Even if you pay $0 in origination fees, the loan manager is still getting his commission and somebody is paying for the documents, credit check, filing, etc..
Consumers seem to underestimate exactly how much money origination fees can be. Often times, most consumers are unable to afford to even pay the fee itself. This is why we advise that you add on the origination fees into your loan so that the amount can be deducted from the loan proceeds right away.
All in all, paying an origination fee for a personal loan can be worth it for most consumers. If you are looking to get a personal loan, CrediReady can help. Our nationwide network of trusted and verified lenders work with borrowers in all credit situations. Take a moment to fill out our free no-obligation loan inquiry form and get the money you need today!