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What Should You Know About Your Loan Fees?

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Achieving financial stability is not an easy feat. Many individuals try hard to achieve that situation in life. However, it doesn’t come easily. Thankfully, some ways make this possible such as investing or running a businessHowever, these methods often come with a price, and that’s money as your capital. Fortunately, acquiring a business loan has become an attainable resource that can help you finance your new venture. But before you jump into taking out loans, there are few things that you should know about, such as loan fees. Expect that there will be loan fee charges that you will incur when you file for a loan. 

We will tell you what these loan fees are and why they are included in loans. 

What Is A Loan Fee?

There are many types of fees that you will encounter when filing for a loan application, and a loan fee is just one of them. A loan fee is a charged amount associated with your loan that does not include the interest rate. So, technically, the loan fee is a separate charge. 

Types of Loan Fees 

There are different types of loan fees, and some loan types do not charge it. However, it’s best to understand these types of loan fees to better understand each. 

Loan Application Fee 

Loan application

When you sign up for a loan, for example, a personal loan, you need to pay a loan application fee. Loan application fees are most widely used in the processing and underwriting of a mortgage loan. Moreover, it is upfront and non-refundable payment when you submit your loan application.

Loan application fee charges vary from lender to another, while some lenders don’t charge a loan application fee at all. If you find that your specific lender charges a loan application fee and you have a low credit score, it might pose a risk for you. To avoid loan denial issues, work on your credit score first or shop around and look for a lender that does not charge a loan application fee. 

Origination Fee 

There’s some confusion between the origination and loan application fee since many lenders use them interchangeably. However, it’s best defined as the loan application fee charged for processing and underwrite your loan application. In contrast, the origination fee will be charged once your loan is approved. Origination fees are most often charged when securing a mortgage.

Signing papers
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Cash Advance Fees 

For some individuals, the credit line is their mode of loan resource. They find it easier to apply for a credit line through getting a credit card rather than taking out the traditional personal loan. However, a credit card is not exempted for lenders to charge loan fees or cash advance fees. 

Sometimes, cash advance fees are expensive because it doesn’t have a grace period. Interest starts to incur the moment you withdraw your cash in an ATM or over the bank counter. You need to be aware of the maximum loan amount your credit card issuer grants you because it can damage your credit score. So, try to avoid maxing out your credit limit and practice maintaining a low credit utilization rate.

Appraisal Fees 

You only need to pay an appraisal fee if you intend to propose a property to use as your collateral for the loan you want to apply. Typically, lenders want to know what it’s worth. The standard process is to ask a third-party service or an independent appraisal company to assess your property. And you’re required to pay for this appraisal assessment service. You can ask for the appraisal copy once the assessment is done. 

Refinancing Fees 

This is widely popular in mortgage loans, especially if the borrowers want to look for a more competitive mortgage product. If you decide to apply for refinancing, you should ask your lender how much it will cost as refinancing works like another application fee. Some lenders even charge it expensively, so try to negotiate if possible. 

Calculating loan fees
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Late Fees 

This is the only loan fee that you don’t want to encounter because you have missed your monthly repayments. Also, consistent late repayments of the loan will consider you as a delinquent or irresponsible borrower. 

This may affect your credit history as reports of late repayments are reported to credit bureaus. You are only charged one late fee per month, but late fees can be expensive if they start to accumulate.


Taking out a loan for your business can be an instant resolution to any financial matters you have at hand. However, it also comes with a price, and that price is something that you should consider first. Whatever type of loan you intend to apply for will come with loan fees. You need to check with your lender about all the charges you will incur when you’re approved with the loan. This is to prepare yourself to pay for the fees you’ll encounter for the entire loan duration. 

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