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6 Personal Loan Fees You Should Know About

Do personal loans have any fees? Every personal loan includes an interest fee, which is the cost of borrowing money.

Loans with different interest rates can result in significantly different loans, even for the same amount of money, as a consequence of their varying costs.

Another thing that many individuals are unaware of is the fact that several loans charge costs. These charges are tacked on to whatever interest you pay.

Several charges may be levied on your loan, including:

  1. Late Payment Fees

    Late payment fees may be levied on a wide range of loans, personal and otherwise. They are charged each time you fail to make a scheduled payment.

  2. Returned Check Fees

    Fees for returned checks are typically referred to as insufficient funds fees, and they generally come with late payment penalties.

  3. Origination Fees

    A common personal loan charge is an origin fee. They are charged when your loan is authorized and the funds are delivered to your account.

  4. Application Fees

    One of the most frequent charges levied by personal loan lenders is the application fee.

  5. Prepayment Penalty

    When you pay off your loan ahead of schedule, you will be charged prepayment costs.

  6. Payment Protection Insurance

    Payment protection insurance is a form of coverage that protects you against the loss of your money.

The cost of these fees varies based on the loan. Furthermore, not every loan incurs each charge.

Some loans do not include many of these fees and expenses. It’s critical to compare interest rates and costs to choose the best loan.

We’ll break down each of these personal loan fees in more detail and how to avoid them.

6 Personal Loan Fees You Should Know About

1. Late Payment Fees

Late payment fees may be levied on a wide range of loans, personal and otherwise. They are charged each time you fail to make a scheduled payment.

These fees are generally calculated as a flat amount or a percentage of your typical monthly payment.

These fees might be as little as $25 or $50 if they’re flat fees, or 3% to 5% if they’re percentage-based.

  • Trying to persuade borrowers to pay on time. People are more inclined to pay on time if late payments result in a fee.
  • The second reason is to reduce the risk of a loan going sour. A person who makes a late payment has an increased chance of defaulting on a loan.

Lenders may recover some of their expenditures sooner by charging penalties for late payments, lowering their exposure.

Late Payment Fees From Top Lenders

LenderLate Payment FeeTime Frame
Sofi4% of the unpaid amount or $5, whichever is lesser15 days from missed payment date
Upstart5% of the unpaid amount or $15, whichever is greater10 days from missed payment date
Discover$39Must pay by due date
American Express$39Must pay by due date

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2. Returned Check Fees

Fees for returned checks are typically referred to as insufficient funds fees, and they generally come with late payment penalties.

These fees are incurred when you try to make a payment on your loan but don’t have enough money.

You write a $550 per month check to fulfill your financial obligation when your account balance is only $500. The cheque will not be accepted by your lender.

Because the lender was unable to get paid, you’ll be charged a late payment fee.

The costs of processing a check that wasn’t valid will also result in a returned check fee from the lender.

Returned checks are usually for a fixed sum and range from $20 to $50.

Top Lenders With Returned Check Fee

LenderReturned Check Fee
Discover$27
LendingClub$15
PayoffNone
Upstart$15

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3. Origination Fees

A common personal loan charge is an origin fee. They are charged when your loan is authorized and the funds are delivered to your account.

The interest rates and fees for loans from banks, credit unions, and online lenders are typically set according to a percentage of the amount you borrow.

If you take out a $30,000 loan with an origination fee of 4%, the fee will be $1,200. If you borrowed $20,000, the cost would be $800.

You continue to receive the whole amount of the loan, but your first bill will show the amount you borrowed plus the interest charge as your outstanding balance.

You’ll be charged interest on the amount of the charge, making it a doubly harsh penalty.

Origination fees are often 1% to 6% of the overall sum of the loan.

Lenders charge an origination fee to minimize their risk and increase their profits. They also assist lenders in promoting cheaper interest rates.

Lenders may promote a lower interest rate to obtain more customers by advertising the rate, but with an origination charge.

Top Lenders With Origination Fees

LenderOrigination Fee
American ExpressNone
DiscoverNone
LendingClub1.0% to 6.0%
Payoff2.0% to 5.0%
Upstart0% to 8.0%
SoFiNone

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Get The Loan ​Comparison Calculator

    It allows you to compare different loan scenarios. By taking 2 different loans, then manipulate it, extra payment per month, time to pay off, and more.

    After that it will show you the difference between accumulated interest, days between payoff dates, and things along those lines

    4. Application Fees

    One of the most frequent charges levied by personal loan lenders is the application fee.

    When you apply for a loan before receiving a loan offer, you may pay an application fee.

    The application fee is often between $25 and $50.

    It’s a hassle to pay a prepayment penalty since you might not get a loan even if you pay the fee.

    Commonly, lenders would charge an application fee. Loans are not free to process.

    These costs must be paid by the lender:

    • Staff salaries to evaluate the application.
    • Charge for a copy of your credit report
    • Other administrative expenses.

    Solution: Look for lenders that don’t charge this fee. But If you have to pay an application fee, make sure you’ll qualify.

    You don’t want to be in a position where you’ve spent hundreds of dollars applying for loans and never been accepted.

    Top Lenders With No Application Fee

    LenderApplication Fee
    DiscoverNone
    PayoffNone
    American ExpressNone
    USAANone

    5. Prepayment Penalty

    Although prepayment penalties are uncommon, they are nevertheless something to be concerned about.

    When you pay off your loan ahead of schedule, you will be charged prepayment costs.

    So, if you took out a 3-year loan and paid it off in 2 years, you might be fined.

    Because the lender receives all of its money back early, it may appear to be a waste of money. From the lender’s standpoint, it makes perfect sense.

    The lender is relying on the interest it will earn from your loan.

    Because the lender loses money if you repay your debt early, it attempts to make up for part of the lost potential income by encouraging you to borrow even more.

    Typically, prepayment penalties are between 2 and 5% of the loan amount.

    If you opt to pay off your debt early, be sure your lender is prepared for any extra payments you make.

    Extra payments are sometimes used to cover interest charges rather than principal.

    Even if you send extra money with every payment in this scenario, you won’t pay off the loan early.

    To avoid this fee: Contact your lender and provide detailed instructions as to how extra payments should be handled in order for your payments to be properly applied.

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    6. Payment Protection Insurance

    Payment protection insurance is a form of coverage that protects you against the loss of your money.

    For any sort of loan, including personal loans, you may get payment protection insurance.

    If you become unable to work due to illness or an accident, your policy will cover your monthly payments.

    Payment protection insurance protects you from financial ruin should something calamitous happen to you, such as sickness, accident, death, or unemployment.

    There are some lenders who will give you PPI, but they don’t have to.

    If you’re certain that you’ll be able to pay off the debt even if your employment status changes, it isn’t required.

    It may be a good idea to take out a personal loan if you feel more at ease with the debt.

    PPI costs can be significantly different, depending on your age, monthly payment, and creditworthiness. It is usually less than 1% of your entire loan sum.

    You may also like: 9 Benefits Of Obtaining a Personal Loan

    How to Avoid Personal Loan Fees

    So, now that you’ve discovered all of the charges you’ll encounter if you apply for a personal loan, how can you avoid them? Consider lenders that don’t charge these fees.

    There are a lot of lenders that claim to be no-fee lenders.

    They want to make it as easy as possible for you to get a loan, with no origination fees or prepayment penalties.

    Even no-fee lenders charge late payments and returned check costs, which may be significant if you have to pay back your loan right away.

    The easiest method to avoid this is not to make late payments in the first place.

    Lenders that offer low fees may charge higher interest rates. A lender with low rates may also impose a slew of charges.

    You may discover that a higher-rate loan is less expensive because there is no origination charge and you intend to pay it off early.

    The finest approach to prepare for any loan application is to obtain a detailed list of charges from the lender.

    This will eliminate any and all financing charges as well as the precise amount of the fee.

    If you’ve done your homework, the sum of personal loans may be calculated after you’ve gathered this information.

    Frequently Asked Questions

    Do banks charge a loan application fee?

    Bank application fees are only one of the numerous charges that lenders may impose on an advance. Two kinds of fees that may be charged: Origination and monthly servicing fees.

    Fees enable a lender to cover associated expenditures such as underwriting and processing a loan.

    Can a lender charge an application fee?

    Lenders do not always charge an application fee, if they do, they must make it clear upfront.

    Loan application fees are usually non-refundable, but you may sometimes negotiate with the lender to waive it if you have a strong negotiating position.

    Do personal loans have hidden fees?

    Personal loans are less difficult to obtain than they have been in the past, but they still come with expenses, such as APR and other hidden costs, like any credit product.