Common Personal Loan Fees & Charges

Some of the best personal loans come with various charges and fees. Because this type of loan requires no collateral, the lender pulls your credit report to determine just how creditworthy you are. The higher your score, the less risk to the lender. Therefore, if you have a good credit score, you will have no problem securing a personal loan at a low interest rate.

Preparing for Personal Loan Fees

​With the increase in personal loan opportunities, it is easy to look past possible personal loan fees. Knowing how to spot these fees will be key to ensuring you take out the best personal loan for you. 

What Are Prepayment Fees?

These type of personal loan fees are penalties for paying a loan off before its scheduled due date. As an example, you took out a $5,000 personal loan for a three-year period, but because you made higher monthly payments than required, you had the loan paid off in just two years.

Take note that not all personal loans have prepayment fees nor do all lenders apply them. However, before agreeing to anything, carefully read the terms and conditions to look for a prepayment clause. Be aware that not all personal loan prepayment fees are the same. Depending on the type, you may not have to wait out the terms of the loan.

• Flat Rate: This prepayment fee requires you to pay a lump sum of money to terminate the loan. Lenders are trying to get you to pay as scheduled for the life of the loan.
• ​Straightforward Penalty: With this clause, you pay a certain percentage of the remaining interest balance.
• ​Sliding Scale: Rather than a flat personal loan fee percentage, this fee imposes a bigger penalty the earlier the loan is paid off. For instance, if you have a five-year loan, you might be penalized 5 percent by paying the loan off in the first year but only 1 percent during the fourth year.
• Short Term: If you take out a short-term personal loan, the prepayment fee usually requires you to prepay a percentage of the full remaining balance. The reason being that short-term loans do not amortize.

What is an Origination Fee?

This personal loan fee is used to pay costs associated with originating a loan. This personal loan fee covers things like paperwork and calculations for determining your interest rate. In simple terms, your lender uses an origination fee to conduct research on you as the potential borrower. While many personal loan lenders advertise the absence of this fee, there are still some lenders who typically charge this personal loan fee.

What Are Late Payment Fees?

Like many other lenders, it is common for an online personal loan company to charge a late payment fee. This is the last of type of personal loan fees. The easiest way to avoid this is to make your monthly payments on time every month. Not only will this prevent you from being charged a late payment fee, it will also protect your credit from damage. Typically, this fee is a flat fee, although it can also be a percentage of your payment, depending on the lender.