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A Complete Guide to Personal Loan Fees

Here are the fees you should be aware of when taking out a personal loan.

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The good news is that you can get a personal loan for almost every need. The bad news is that taking out a personal loan could come with many different fees. 

If you’re hunting for a personal loan, check to see if your potential lender charges any of these fees. Remember, the more fees you’re likely to face, the more money you’re on the hook to pay in addition to the borrowed amount. We break down some of the fees that you may encounter during the personal loan application process.



Common Personal Loan Fees & Charges

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Origination Fee

A personal loan origination fee is what lenders charge you, the borrower, for making a loan (originating it). It usually includes the cost of creating and processing the loan. 

An origination fee is a one-time cost and is usually charged as a percentage of your loan but you might see it as a flat fee regardless of how much you borrow. This percentage-based fee ranges from 1% to 8%, depending on your credit score and lender.

Here’s what that might look like for you and what to look out for.

  • Origination Fee Deducted from Loan Amount: Say you’re approved for a $10,000 loan with a 5% origination fee. That $500 is removed from the total loan amount disbursed, and you’ll get $9,500. The interest you pay will cover the full amount you borrowed — $10,000 — not just the amount you received. 
  • Requesting a Higher Borrow Amount to Cover the Fee: If you need the full $10,000, you might need to explore other lenders or possibly take out another loan to cover those costs. Sometimes, you can request a higher borrow amount to cover the origination fee. 

Not all personal loan lenders charge an origination fee separate from the estimated interest rate. You might see it implemented in other ways. The interest rate on your loan is what you’re charged to borrow a loan. The APR is the annual cost to borrow the loan, including interest and fees. So that APR might include an origination fee, plus other loan fees.

Application Fee or Documentation Fee

A loan application fee is a one-time fee for submitting a loan application. It tends to be a flat rate and is usually non-refundable regardless of whether your application was accepted or denied. If you have to apply to multiple lenders who charge this fee, you could face many different application fees.

It’s similar to an origination fee, and in some cases, it might be considered one. But an origination fee covers the creation of a loan while an application fee covers the administrative costs of processing your loan. 

Application fees aren’t as common as origination fees and many lenders don’t charge them separately. But you might see an origination fee that encompasses both origination and processing.

Prepayment Penalty

Some lenders charge a prepayment penalty — a fee if you pay your loan off before the terms are up. You might see this charge on mortgages or auto loans, but some personal loan lenders also charge this, although it’s not as common.

The fee is usually a percentage of the amount you borrowed or a flat fee and it gets implemented based on how early you pay off your loan.

For example, say you took out a loan with repayment terms of five years and you paid off your loan in four months. The lender might charge you a fee for paying off your loan so early. In most cases, paying off your loan before your terms are up is fine, but some lenders charge this fee if you pay it too early. Check your terms to see if you could face a prepayment penalty.

Late Fees

Most lenders have late fees in some form, although a few don’t charge them. The best way to find out is to search the company’s FAQs and terms pages to see what happens if you don’t make an on-time payment.

There’s no set standard on how much you could pay in late fees. Some might charge a small percentage of the unpaid amount while others might charge a set rate every time you miss a payment. Some lenders charge immediately upon not receiving the payment by the due date, while others give you a buffer — or a few days — to make your monthly payment. Some lenders might give you a free pass the first time you miss a payment but will implement it after that. It varies widely by lender.

Late fees are common in personal loans, so the best way to avoid them is to set up auto-pay where the lender triggers a payment to your loan simultaneously, for the same amount, every month. Most lenders offer this so you never miss a payment. 

Returned Check or Returned Payment Fee

If you set up auto-pay and don’t have enough money in your account to cover the cost, you could face a returned payment fee, sometimes called an insufficient funds fee.

If you don’t have auto-pay set up and you pay by check, you might see this called a returned check fee. The fee is usually paired with a late fee since you didn’t have enough to cover the amount that was due by the due date. They tend to be flat fees and vary by lender.


Best No-Fee Personal Loans

LightStream

  • Loan Amount: $5,000 – $100,000
  • APR Range: 5.99% – 21.49%
  • Loan Terms: 2 – 12 years
  • Credit Score: 660 or higher

LightStream is an online lender offering no fees and low-rate personal loans for several purposes.

Pros
  • Relatively low APRs
  • No origination fees, no late fees
  • Personal loans up to $100,000
  • Autopay discount
  • Joint applications allowed
Cons
  • No physical branches
  • Rates and terms vary by loan purpose
  • No soft pull prequalification

Lightstream is Truist’s online lending division, formed in 2019 after SunTrust and BB&T merged. Offering personal loans for several purposes, including debt consolidation, medical expenses, home improvement, weddings, car purchases, and more, LightStream could be worth considering for those seeking flexibility. 

The lender offers relatively low rates compared to competitors, including autopay discounts. Eligible borrowers can get approved for personal loans from $5,000 to $100,000, and loan terms range from 24 to 144 months. Of course, the rate and term you get will depend on the specific loan purpose.

Its personal loans also have no origination fees, which can help keep borrowing costs low. However, borrowers will likely need a credit score of 660 to get approved for a Lightstream personal loan. 

Overall, it’s a good lender to add to your shortlist if you’re looking for flexible funding, no fees, and a low APR. Lightstream may also disburse loans as soon as the same day you’re approved, making this lender a decent choice if you need fast funding.

SoFi

  • Loan Amount: $5,000 – $100,000
  • APR Range: 7.99% – 23.43%
  • Loan Terms: 2 – 7 years
  • Credit Score: 680 or higher

SoFi is an online lender known for its lack of fees and high loan maximum.

Pros
  • No origination fees and no late fees
  • Loans up to $100,000
  • Unemployment protection available
  • Rate discounts
  • Co-borrower allowed
Cons
  • No physical branches
  • High minimum loan amount

SoFi offers a competitive personal loan product that boasts no origination fees, no late fees, and a high maximum loan amount of $100,000. SoFi is one of only a handful of lenders offering loans as large as $100,000. If you need a substantial loan to cover a considerable expense, like a home renovation, SoFi’s high maximum can be a strong option. Its repayment terms range from 24 to 84 months.

One standout feature of SoFi is that it offers unemployment protection, which might allow you to pause payments if you lose your job. This is a unique offering that sets it apart from competitors.

SoFi also lets you view your rate without impacting your credit score. While doing a soft credit pull is relatively common, it’s still worth mentioning because some lenders require a hard inquiry before they provide a rate. Those who decide to formally apply will likely need a strong credit score to get approved for a SoFi personal loan. 

Marcus by Goldman Sachs

  • Loan Amount: $3,500 – $40,000
  • APR Range: 6.99% – 24.99%
  • Loan Terms: 3 – 6 years
  • Credit Score: 660 or higher

Personal loans offered through Marcus by Goldman Sachs come with unique features, such as no fees, rewards for on-time payments, rate discounts, and the ability to change your due date.

Pros
  • No fees
  • On-time payment reward lets you skip a monthly payment
  • Autopay rate discount
  • Can change loan due dates
Cons
  • No physical locations
  • Can take up to three days to disburse loan funds

Personal loans from Marcus feature no fees, and eligible applicants can borrow up to $40,000. APRs are competitive, ranging from 6.99% to 24.99%, and repayment terms range from 36 to 72 months.

These personal loans come with some notably unique features. Those who make consistent on-time payments are rewarded with the ability to skip a month. If you make 12 consecutive monthly payments, you can skip a payment for one month without interest won’t accrue during that time. Marcus will simply extend your loan term by a month. Borrowers can also benefit from an autopay discount that will apply a 0.25% APR reduction when enrolled.

To get approved for a Marcus personal loan, you’ll likely need a credit score of at least 660. 


FAQs

Do personal loans have hidden fees?

Most lenders must disclose their fee structure, but you might not see it in plain sight. Some lenders publicly list what fees they charge, how much those fees are, and when they go into effect. Others have fee amount hidden in their loan terms and conditions, which you must agree to when applying for a loan. You might also see an annual percentage rate, or APR, which includes the interest rate and fees together. Unfortunately, there’s no set standard for how lenders need to share their fees.

Are there no-fee personal loans?

Yes, there are a few lenders that offer no-fee personal loans, such as no origination fees, late fees and/or prepayment penalties. But the borrowing requirements may be more stringent and may only be available for borrowers with a strong credit score.

If you come across a lender that says it doesn’t charge fees, carefully read your agreement to see if you’re missing any pertinent details. It’s also good to compare multiple lenders to see which ones charge the lowest interest and fewest fees.

When comparing lenders, make sure you’re analyzing the same figures. For instance, don’t compare one lender’s interest rate to another lender’s APR. The fewer the fees and the lower the interest rate, the less extra money you’ll pay to borrow a personal loan.

Do personal loans have closing costs?

Personal loans charge an origination fee which covers the cost of creating and processing the loan. Similar to closing costs, origination fees are typically charged as a percentage of the loan amount, but can sometimes be charged as a flat fee.

While we work hard on our research, we do not always provide a complete listing of all available offers from credit-card companies and banks. And because offers can change, we cannot guarantee that our information will always be up to date, so we encourage you to verify all the terms and conditions of any financial product before you apply.

Dori Zinn
Dori Zinnhttps://twitter.com/dorizinn
Dori Zinn is an award-winning journalist who has been covering personal finance for more than a decade with bylines featured in the New York Times, CNET, Forbes, TIME, Yahoo!, Business Insider, and more. She loves helping people learn about money, whether that’s buying a home, paying for college, investing, saving for retirement, and so much more.

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