Jun 05, 2025

A loan origination fee is a one-time, upfront fee some lenders charge for processing a loan. It’s sometimes called a sign-up fee or an upfront fee.
Jun 05, 2025
A loan origination fee is a one-time, upfront fee some lenders charge for processing a loan. It’s sometimes called a sign-up fee or an upfront fee.
It’s important to understand personal loan origination fees and all the costs involved. A personal loan may be a great way to consolidate higher-interest debt. Or pay for an unexpected expense.
But any extra fees beyond the interest rate can increase the total cost of a loan. When you take out a personal loan with an origination fee, this can mean you’ll get less money upfront. Or that you may have to pay more interest over time.
While many lenders charge fees, not all do. It’s not a bad idea to shop around and find one that doesn’t charge any fees. It could end up saving you some money.
Get the details about personal loan origination fees and why it could pay to avoid them.
A loan origination fee is typically charged as a percentage of the total loan amount. For example, for a $10,000 loan, a 5% origination fee would be $500.
The origination fee is deducted from the total amount borrowed. This means that when the loan is funded, the fee will be subtracted from the funds before you receive them. So you get less money sent to you than you applied for. You’ll have to apply for enough funds to cover the origination fee to get the net amount you need from your loan. Remember, you'll still have to repay (and pay interest on) the full loan amount.
For example, let’s say you need $10,000 for a home repair. If your $10,000 loan comes with a $500 origination fee (5%), you would receive $9,500 after the fee was deducted. To get the full $10,000 with a 5% origination fee you would need to borrow $10,527. You’ll pay interest on the full amount, including the fee. A larger loan amount means that you'll pay more in interest over time.
Loan origination fees can vary depending on the lender. Loan origination fees usually range from 0.5% to 1%. But some can go higher.
Because loan origination fees are usually based on a percentage of the total loan, a larger loan amount will increase the loan origination fee you might pay.
In addition to decreasing the total funds you get; an origination fee may also increase the total cost of the loan. This could make your annual percentage rate (APR) higher than your interest rate.
Consider the example of a $15,000 loan and look at how different loan origination fees affect the cost of the loan.
If you borrow $15,000 and the loan includes a 3% ($450) origination fee, you'll get only $14,550 ($15,000 – $450). So, if you wanted to get the full $15,000, you would need to borrow $15,464. The lender would take the $464 fee upfront, but you would have to pay back $15,464, including interest on the total.
These extra costs can add up, especially when the loan origination fee is higher.
The chart below gives quick comparison of how different loan origination fees affect the total cost of borrowing when the loan amount and interest rates are the same.
No Fee | 3% origination fee | 8% origination fee | |
---|---|---|---|
Desired loan amount | $15,000 | $15,000 | $15,000 |
Total loan amount needed to get desired loan amount | $15,000 | $15,464 | $16,305 |
Loan origination fee | $0 | $464 | $1,304 |
Total funds received | $15,000 | $15,000 | $15,000 |
Payment term | 48 months | 48 months | 48 months |
Interest rate | 13.99% | 13.99% | 13.99% |
Monthly payment | $410 | $422 | $445 |
Total interest paid | $4,671 | $4,816 | $5,078 |
Total cost of borrowing (interest plus fee) |
$4,671 | $5,280 | $6,382 |
A loan origination fee can add significantly to the total cost of borrowing.
Loan origination fees are one way that a lender earns money on a loan. Lenders may charge fees to help cover costs associated with originating your loan. This may include administrative fees, verification or credit checks, or other processing expenses.
Loan origination fees are only one type of fee. Other fees that may affect the total amount you owe include:
No, not all personal loans come with loan origination fees. Before applying for a personal loan, you should compare lenders. Look at fees, interest rates, and other factors. While many lenders may charge fees to originate your loan, Discover® Personal Loans charges no loan origination fees. In fact, there are no fees of any kind.
Choosing a loan without origination fees could:
That means that even if a loan has a slightly higher interest rate, you could still save money if it doesn’t come with fees. A lender may offer you a loan with a lower interest rate, but if there's an origination fee, you may end up paying more in interest.
This is why it’s important to compare lenders and review APRs, not just interest rates. APRs factor in upfront fees, such as origination fees, and must be disclosed by all lenders. Whenever a lender charges origination fees, the result is an APR that's higher than the stated interest rate used to calculate the monthly payment.
One way to get the best deal on a personal loan is to look for one where the only extra cost you pay is the interest on the loan. This will also help to ensure that you receive the exact amount you need to cover your home repair or other expenses.
Since a Discover personal loan charges no fee at all, the APR is the same as the interest rate. This can help simplify your calculations and make your loan experience easier and more convenient.
Keep in mind that fees and other costs are not always obvious. That’s why it’s important to read your personal loan agreement carefully. If you’re feeling overwhelmed by the details, we can help you understand the fine print so you can be confident in your decision.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover, a division of Capital One, N.A., (Discover) or its affiliates.