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Personal Loans

5 Personal Loan Fees to

Watch Out For
June 15, 2022 • 3 min read

By Kathryn Pomroy

Quick Answer

While the best personal loan lenders have minimal

fees, some lenders charge fees that can cost you
hundreds or thousands of dollars. Here are some
personal loan fees to look for when choosing a lender.

In this article:

1. Origination Fee

2. Application Fee

3. Prepayment Penalty

4. Late Fee

5. Payment Processing Fee

How to Avoid Personal Loan Fees

Lenders often charge fees to cover costs associated

with providing a personal loan. The types of fees you
may encounter include origination, processing and
late fees, among others. But there are ways to reduce
personal loan fees or get your lender to waive them
entirely. Before taking out a personal loan, review
these Tve fees that lenders might charge.

1. Origination Fee

Some lenders charge a loan origination fee when you

Trst take out a loan. Used to cover the costs to
process and underwrite your loan, origination fees are
calculated as a percentage of the loan amount. These
fees may be deducted from the amount funded or
rolled into the total cost of the loan and paid over
time. Origination fees usually range from 1% to 6%.

2. Application Fee

Application fees cover the costs of processing,

reviewing and documenting your loan application. The
fee is typically paid at the time of application and
might be nonrefundable, even if the lender denies your
application. Application fees are not common among
personal loan lenders.

3. Prepayment Penalty

A prepayment penalty, also called an exit fee, may be

charged if you pay off your loan before the end of the
term. Prepayment penalties are designed to cover the
interest your lender would have earned over the entire
duration of your loan. This fee can be a percentage of
your loan balance or a Zat fee, and can be fairly
expensive. Some personal loan lenders do not charge
prepayment penalties.

4. Late Fee

A lender may charge a late fee when you miss a

payment or fail to pay your loan in full by the end of
the term. Like a prepayment penalty, late fees can be
either a Zat fee or a percentage of your loan balance.
Generally, late fees can range from about $25 to $50
or between 3% and 5% of the monthly payment
amount, depending on the lender.

Keep in mind that if a payment ends up being 30 days

or more past due, your lender may report the
delinquency to the credit reporting agencies
(Experian, TransUnion and Equifax). Once reported, it
can remain on your credit report for seven years.

The lender may charge a late fee and a returned check

(or insu_cient funds) fee if you don't have enough
money in your bank account to cover your loan
payment.

5. Payment Processing Fee

Although uncommon, some lenders may charge a

payment processing fee, which can be added to every
payment you make. You might see a check
processing fee or a fee if you don't sign up for
automatic payments. A lender may also charge a fee
to process a wire transfer, which typically costs $15
for each transaction.

How to Avoid Personal Loan Fees

Not all personal loans have fees attached. To avoid or

reduce the fees you incur, take these steps.

Shop around and compare offers. Many lenders

charge fees, but not all. The best way to avoid
paying fees on your personal loan is to shop
around and compare lenders. That way, you'll
know what your costs will be upfront so you're
not surprised later on.

Set up autopay. Many lenders offset loan fees

when you set up autopay. It lowers the risk to
the lender that you'll miss a payment and gives
you the peace of mind that your loan
repayments will be made on time. You'll also
avoid any late fees charged by your lender.

Only borrow what you need. If a lender charges

a loan origination fee, which is usually a
percentage of the amount you borrow, it pays to
only borrow what you need.

Just ask. One strategy to avoid paying loan fees

is to negotiate fees and other charges with your
lender. A lender may waive fees if you're a good
customer or at least reduce the fee amount. But
you'll never know if you don't ask.

The Bottom Line

Fees and other charges can add to the total cost of

your loan, so it's important to closely review the terms
and conditions of a loan prior to applying. To make
your search for a personal loan easier, check out
Experian CreditMatch™ to compare personalized loan
offers from top lenders.

Need a Personal Loan?

Apply for personal loans conTdently and Tnd an

offer matched to your credit situation and based
on your FICO® Score.

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Related Articles:

Avoid These 6 Common Personal Loan Mistakes

Pros and Cons of Personal Loans

How to Get the Best Rate on a Personal Loan

What’s a Good Interest Rate on a Personal Loan?

5 Risks of Taking Out a Personal Loan

What Factors Do Lenders Consider When

Determining My Interest Rate?

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