Origination fee (personal loan).

In plain English

An origination fee is a one-time charge a lender adds for setting up and funding your loan. On a personal loan it is usually a percentage of the loan amount, and lenders often subtract it from the loan proceeds rather than billing you separately. That means if you are approved for $10,000 with a 5 percent fee, you might receive only $9,500 but still owe $10,000. Because the fee is baked in, the loan's APR is higher than the stated interest rate, since APR includes such fees.

01Why it matters

An origination fee can quietly raise your real borrowing cost and shrink the cash you walk away with, so comparing loans by APR (which folds the fee in) beats comparing by interest rate alone.

02The math, step by step

You are approved for a $10,000 loan with a 5 percent origination fee. The lender deducts $500, so you receive $9,500, but you repay based on the full $10,000. If you needed the whole $10,000, you would have to borrow more to net it. Fee ranges vary by lender, so check the actual figure on the lender's loan disclosure before you sign.

03What this is NOT

04Receipts

Every figure on this page is sourced to a primary document. Tap to open the original.