What Is a Personal Loan Origination Fee?

A personal loan origination fee is an upfront expense some lenders charge to cover administrative costs to process the loan. The fee is typically from 1% to 10% of the loan amount.

For example, a 10% origination fee on a $10,000 loan would be $1,000. That amount would be deducted from the loan proceeds, netting you $9,000. You’d still have to repay the full $10,000.

This fee might be called an underwriting, administrative or processing fee. Origination fees are also common on mortgages and federal student loans.

It’s important to compare origination fees between lenders and determine how they add to the overall cost of a personal loan.

Here’s more information on personal loan origination fees, what they cost and when it makes sense to pay the fee.

» MORE: Compare personal loans

How much is a personal loan origination fee?

Origination fees on personal loans usually range from 1% to 10%, though some lenders charge up to 12%. That’s according to the surveys NerdWallet received from more than 30 personal loan lenders. Amounts vary by lender and state. Online lenders are more likely to charge the fee than banks and credit unions.

» COMPARE: Loans with no origination fees

Origination fees by lender

Here’s what some major lenders charge.

Factors that determine your origination fee amount

Your credit score. You’re most likely to qualify with a lender that doesn’t charge an origination fee if you have at least a good credit score (typically mid-600s or higher) and a low debt-to-income (DTI) ratio.

Loan amount. Origination fees are usually assessed as a percentage of the loan amount, so you’ll pay more if you borrow a large amount.

Repayment term. Some lenders may charge lower origination fees for loans with a long repayment term because you’ll pay more interest overall.

Other information on your application. Other factors that can affect your origination fee amount include your income and whether you’ll have a loan co-signer.

The origination fee is accounted for in the loan’s annual percentage rate, or APR, which represents the true annual cost of borrowing when factoring in the interest rate and upfront fees.

Some lenders add the origination fee to the loan balance, but it's more common for a lender to deduct it from the loan. Because an origination fee can reduce your loan balance, be sure the borrowed amount is still enough to cover your expense after the fee is applied.

Origination fee example

Let’s say you need $20,000 to consolidate debt, and the loan you want has a 5% (or $1,000) origination fee. If your lender deducts the origination fee from your loan proceeds, you’d only get $19,000.

You’d have to request $21,053 to get the full amount you need. Once the 5% fee is applied — in this case, $1,053 — you will have $20,000 to use for consolidation.

You would make payments on the $21,053 balance, not the $20,000 you'd receive.

Use a personal loan calculator to see the impact an origination fee would have on your loan.

Is a personal loan origination fee worth it?

Seeing a portion of your proceeds withheld can sting, but an origination fee doesn’t have to be a dealbreaker. The loan may still be cheaper overall than one with an origination fee.

To figure out whether an origination fee is worth it, look at the APR. That figure is the combined total of the interest rate, plus the origination fee, calculated on a yearly basis and shown as a percentage. It represents the true cost of the loan and serves as the best point of comparison if you’re considering multiple lenders.

Example: Origination fees and APRs in action

The example below shows two $10,000 loans, to be repaid over five years (60 months). Loan 1 doesn’t have an origination fee. Loan 2 does have an origination fee — but a lower APR. The total fees and interest for Loan 2 amount to nearly $700 less than the cost of Loan 1.

Other personal loan fees to consider

Late fee: If you don’t make your loan payment on time, your lender can charge a late fee, though many offer a grace period (typically around 15 days) before charging it. Consider setting up automatic payments or due date reminders so you don’t forget to make your payment on time. A loan payment that’s more than 30 days late can negatively affect your credit score.

Non-sufficient funds fee: A lender may charge a non-sufficient funds (NSF) fee if your bank account balance is too low for the lender to debit it. This is also known as a returned check fee. If you miss the due date because the lender couldn’t withdraw funds, you may have to pay a late fee in addition to the NSF fee.

Prepayment fee: Prepayment fees aren’t as common on personal loans as they are on other types of loans like mortgages, but it’s a good idea to read through your loan agreement to ensure you won’t be charged for paying off your loan early.