Loan fees are different from interest. The APR (annual percentage rate) of a loan is the amount of interest you pay while repaying the loan. The longer is takes to repay, the more interest it costs. Loan fees are something else: they are separate and unique charges you pay in addition to the APR.

Every lender is a little different. Yes, they all follow the same laws and industry guidelines, but there is a lot of room left over for businesses to differentiate themselves. Some lenders may charge less interest or lower rates for a longer loan, or charge much higher APR for a short-term loan.

One aspect of lending where there is a lot of difference is the fee payment. All loans charge some kind of interest, but many loans ALSO charge you loan fees on top of the interest!

So before you do any more research on which loan, or lender, is right for you, let’s take a quick look at the most common loan fees lenders charge their borrowers.

Origination Fee:

The most common and confusing of all loan fees – an origination fee is the money charged to you because they approved your loan. That’s right, you get charged a fee for no reason other than you got a loan. That’s like McDonald’s charging you for a hamburger… then adding an additional charge for ordering the hamburger.Most legitimate lenders will waive this, or just roll it into your rates.


Prepayment Fee:

Make a payment early? It should save you money to pay early, but many lenders penalize you for deviating from their repayment schedule in any way. That means if you pay extra, or early, it will cost you! Find a lender that lets you pay extra, or early. This will save you money in the long term.


Late Payment Fee:

This is a standard fee, and one that actually makes sense. If you are late on making a payment, they will you charge a fee. Similar to renting a movie from Redbox. Many lenders offer a one-time grace period for late payments, check with your specific lender about a grace period before taking the loan.


Check Payment Fee:

Most lenders these days prefer (or insist upon) direct deposit and withdrawal. That means the money will come directly from your account to theirs. People who would prefer to pay by check, cash, or money order might be charged a penalty fee. Find out what methods of payment your lender accepts, and if there are fees for any of them!


Unsuccessful Payment Fee

If a check bounces, a business will charge you extra. If a lender is processing a payment made online and that payment is unsuccessful, you might be assessed additional loan fees.


There could be others! Because each lender has its own policies, you never know what kind of extra charges and loan fees might be lurking in the fine print. So make sure to always read your contract, and ask any questions you have before signing for that loan.

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