Common Personal Loan Fees & Charges

Personal loans are a useful source of financing for many borrowers. Interest rates tend to be well below what you’d pay using a credit card. They’re usually unsecured, unlike mortgage loans, which put your property on the line as collateral. And you can use personal loans for nearly anything you want.

However, personal loans can come with unexpected fees. And some lenders charge more than others. This guide explains some of the common fees to watch out for when applying for a personal loan and comparing lenders. For instance, some lenders charge fees such as origination fees, application fees, and late fees.

While these fees might seem difficult to avoid, a select few lenders don’t charge extra fees. We’ll take a look at those as well as how you can ensure you aren’t paying too much for a personal loan.

Common personal loan fees

When you take out a personal loan, you might need to pay several types of fees. We’ve ranked those fees from most common to least common in the table:

Fee type	How much?
Loan origination fee	1% – 10%
Late payment fee	$10 – $100, or 5% of your monthly payment
Loan application fee	1% – 8%
Early repayment (prepayment) fee	1% – 2%
Annual fee	Less than $100

Keep reading because we’ll explain each fee in more detail and tell you which lenders do and don’t charge these fees.

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Loan origination fee

• What it is: Also known as an underwriting fee, this is a one-time upfront fee lenders charge to evaluate your application and issue the funds to your account. Most lenders that charge this fee subtract it from the amount you receive.
• How much: Often between 1% and 10% of the loan amount. (Lenders often charge different origination fees for borrowers based on factors including credit profile and the amount borrowed.)
• Example: You’re approved for a $10,000 personal loan with a 3% origination fee ($300). You get $9,700 after the 3% fee, but you still have to repay $10,000.
• Is it worth it? Depending on your credit profile, you might qualify for a personal loan with no origination fees. If that’s the case, it’s likely not worth it. However, we recommend shopping around and considering the annual percentage rate (APR) of each loan you’re eligible for—this is the annual interest rate with fees. 

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Lenders that don’t charge this fee	Lenders that charge this fee
LightStream (best for excellent credit)	Upgrade (best for fair credit):  1.85% – 9.99%
SoFi (best for good credit)	Upstart (best for thin—aka little to no—credit): 0% – 12%
	Happy Money (best for credit card debt): 0% – 5%
	LendingPoint (best for changing payment date) 0% – 6%
	Achieve (best for choosing payment date): 1.99% – 5.99%
	Best Egg (best for a secured loan): 0.99% – 5.99%

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Late payment fee

• What it is: Late payment fees are fees lenders charge when you make a payment after the due date. They do this to compensate themselves for the added risk of you paying late. In most cases, you pay late fees out of pocket.
• How much? $10 to $100, or 5% of the unpaid amount.
• Example: You have a $150 monthly payment on your personal loan and pay one week late. As a result, the company assesses a $25 late fee to your account, so your next payment is $175.
• Is it worth it? Some lenders charge these fees, but you won’t incur them unless you make your payment late. Lower fees are always better for borrowers, but if the APR is low and you’re confident you can make on-time payments, it isn’t a red flag if a company charges late fees.

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Lenders that don’t charge this fee	Lenders that charge this fee
LightStream (best for excellent credit)	Upgrade (best for fair credit):  $10
SoFi (best for good credit)	Upstart (best for thin—aka little to no—credit): 5% of the unpaid amount or $15, whichever is greater
Happy Money (best for credit card debt)	Best Egg (best for a secured loan): $15
	LendingPoint (best for changing payment date): Fees vary by state
	Achieve (best for choosing payment date): $10

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Loan application fee

• What it is: A one-time fee you pay up-front when you submit your application. This fee covers the initial costs of processing the loan.
• How much: 1% – 8%
• Example: If you get a $5,000 personal loan with a 5% application fee, you’ll pay $250 out of pocket when you submit your application.
• Is it worth it? Many lenders don’t charge a fee to apply, so we recommend considering lenders that don’t charge an application fee and comparing APRs.

None of our top-rated personal loan companies charge application fees:

• LightStream (best for excellent credit)
• SoFi (best for good credit)
• Upgrade (best for fair credit)
• Upstart (best for thin—aka little to no—credit)
• Happy Money (best for credit card debt)
• LendingPoint (best for changing payment date)
• Best Egg (best for a secured loan)
• Achieve (best for choosing payment date) 

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Prepayment penalty

• What it is: A fee lenders charge if you pay off your personal loan before the end of its term. Lenders charge this fee because they make money on loan interest and this compensates them for lost revenue. You typically pay this fee out of pocket.
• How much: Typically 1% to 2% of the loan amount.
• Example: If you have a $5,000 personal loan and there is a 1% prepayment penalty, you incur a 1% penalty for paying early. You then pay the additional $50, either before or after making your final loan payment.
• Is it worth it?: Because these fees are not very common and they effectively penalize you for paying your loan off early, it’s best to avoid them if possible. The only time it might be worth it is if you need money quickly and most lenders won’t approve you.

None of our top-rated personal loan companies charge early repayment fees.

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Annual fee

• What it is: Annual fees are yearly fees lenders might charge for managing your personal loan. It might cover administrative costs and other overhead that comes with maintaing your loan. Lenders might add these fees to your loan amount or invoice them separately.
• How much? Typically less than $100.
• Example: Your personal loan lender sends you a $50 bill once a year to keep your loan active.
• Is it worth it? These fees are uncommon for personal loans, so it’s best to avoid them. 

None of our top-rated personal loan companies charge annual fees.

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How to Find the Cheapest Personal Loan

How to compare lenders’ loan fees

Keep the following in mind when comparing loan fees to ensure you get the best deal when you borrow.

Compare APRs, not interest rates

An APR looks at the total cost of borrowing each year. 

Tip

Reminder from Erin Kinkade, CFP®: “The quoted APR does not include late fees or prepayment penalties, but the APR could increase if a borrower pays late fees or prepayment fees in a given year. APR does not represent the interest rate alone on the loan; APR represents the interest rate and associated fees.”

If one lender charges an origination fee and another has a lower interest rate, for example, compare APRs to see how the combined fees and interest rates affect the long-term cost of each loan option.

The table below shows two hypothetical $5,000 loans with the same five-year repayment term to show how a loan with a fee could be similar to one without over the long term:

	Loan 1	Loan 2
Interest rate	6.25%	5.5%
Origination fee	$0	$100
APR	6.25%	6.32%
Monthly payment	$97.25	$95.51

Erin Kinkade, CFP®, advises borrowers to avoid three types of fees, if possible:

1. Annual (because it’s recurring)
2. Origination (can be a large sum that affects the amount you need to borrow)
3. Prepayment (typically a one-time fee, but should be avoidable because these are not common on personal loans)

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What’s a Good Rate for a Personal Loan

Know how you’ll pay the fee

In many cases, the fees come out of the funds you borrow. This means you get less cash in hand than you’re borrowing on paper.

This means you don’t take on additional debt, but it also means you borrow less. Be sure to consider fees when determining the loan amount you need.

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How do personal loans work?

Consider the loan’s flexibility

Many personal loans come with fees, but some lenders have more flexible terms than others.

For instance, many let you pay the loan off early without prepayment penalties but may charge a late fee. Others charge no fees whatsoever.

Find out whether the lender allows forbearance or modification of the loan terms if you have trouble making payments for any reason. Depending on your situation, it might be important to find a loan that has this flexibility.

Lenders that don’t charge any fees

Check out our guide to four no-fee personal loans.

If you have excellent credit, LightStream is one of the best options available. It doesn’t charge fees and will beat competitors’ rates. Loan amounts go up to $100,000, and a variety of terms is available.

If you have good but not excellent credit, SoFi is worth a look. It also charges no fees. SoFi has a narrower range of payment terms than LightStream but offers unique benefits. It also lowers your interest rate by 0.25% if you enroll in autopay.

FAQ

Is it normal to pay an upfront fee for a loan?

Many personal loans and other types of loans have origination fees, so it’s not unusual to pay some fees. However, other types of fees, such as late payment fees, prepayment fees, and annual fees, are less common. If the personal loan you’re considering charges these fees, check whether other options are available.

Do online lenders charge fewer fees than traditional banks?

Online lenders might charge fewer fees in some cases, but it comes down to the individual lender. Online lenders offer several advantages that allow them to charge lower fees, including lower costs (due to no physical branches) and more specialized products. Online lenders don’t always charge lower fees, but it’s important to compare quotes from several lenders before moving forward.

What hidden fees should I be aware of?

A wide range of hidden fees could be added to personal loans. These might include origination fees, late fees, and prepayment fees. Check your lender’s terms and your APR to be aware of all fees before you commit.

What are grace periods, and do they help in avoiding late payment fees?

A grace period is a set period after a bill is due when a payment can be made without incurring penalties. Some lenders offer grace periods with personal loans. A grace period can allow you to avoid late fees, but interest may still accrue during this time. Thus, your costs can still increase if you don’t make your payment by the due date.

How can I compare fees across multiple lenders?

Start by researching lenders and determining a handful that interest you. Then, get quotes from each lender, listing all the fees and the APR. 
Use a personal loan calculator or spreadsheet to compare each lender and the total cost of the loan.