Loans & Credit

What Is a Loan Origination Fee?

A loan origination fee is a one-time charge a lender collects for processing a new loan, usually expressed as a percentage of the loan amount. It may be paid upfront or deducted from the loan proceeds. Because it is a cost of borrowing, it is normally included in the loan's APR.

How It Is Calculated

Origination fee = loan amount × fee percentage. A 1% fee on a 20,000 loan is 200. If the fee is deducted from the proceeds, the borrower receives 19,800 but repays interest on the full 20,000.

Origination Fee and APR

Two loans with the same interest rate can have different APRs if their origination fees differ, which is why APR is used to compare total borrowing cost.

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🔗 Related Terms

APR (Annual Percentage Rate) Closing Costs Personal Loan Interest Rate Mortgage Points

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.