An origination fee is a common cost that is sometimes charged when you take out loans like mortgages, auto loans and personal loans. Varying in cost by lender, the fee may be used to help pay for things like: underwriting the loan, verifying documents and pulling your credit report. While origination fees add to the total cost of borrowing money, they may be worth the expense if the loan comes with a low interest rate.
What is Loan Origination?
Just like it sounds, loan origination is the complete process of applying for and getting a new loan. It typically includes all of the steps from applying online to getting funds deposited in your account.
Personal Loan Pre-Qualification Process
Pre-qualifying for a loan is a great way to find out what interest rate you could qualify for when exploring loan options. The process is usually quick and depending on the lender, won’t impact your credit score.
Personal Loan Qualification
After you apply for a personal loan, your lender will review your application and decide if you’re creditworthy enough to pay back what you borrow. While requirements could vary by lender, here are a few that may be considered:
Your credit score
Good credit is one of the ways to help secure a personal loan. Those who have a credit score of at least 640 generally fall within the “good score” crowd.
A low debt-to-income ratio
If your income exceeds your debt, you may be in luck. The lower your debt-to-income ratio, the better the chance you have to secure a personal loan.
A means for repayment
Applicants who get approved for a personal loan often generate enough income to repay their loan.
Information Needed to Complete the Loan
These days, applying for a personal loan is generally a pretty hassle-free process, especially if you have good credit. In some cases, you may be asked to submit additional information to help your lender during the verification process. Things like bank statements and a W-2 could be helpful to have on hand in the event you’re asked to provide some extra documentation.
Completing the Loan Application
Applying for a personal loan has never been faster or easier. And, many lenders offer the ability to apply right online from the comfort of your home or smart phone.
Before you apply, it’s important to:
- Know your credit score and what’s on your credit report.
- Determine how much you’ll need to borrow.
- Consider all financial options available to you.
- Do some research and choose a responsible lender that can quickly meet your financial needs.
What is a Loan Origination Fee?
A loan origination fee is a fee that may be charged by a lender for the processing of your loan. The fee is included in your APR which makes it easy for you to compare the cost of borrowing money with other lenders.
How Do Origination Fees Work?
Not every origination fee is created equal. Some are calculated differently, depending on the type of loan and the lender. Generally speaking, they could range anywhere from one to six percent of the amount you borrow and could be based on factors including but not limited to, the length of the loan, information on your application, and your creditworthiness.
What You Should Know When Obtaining a Personal Loan
A personal loan may be a great way for you to pay for unexpected costs that pop up in life. When applying for a personal loan, be smart about it. Take a look at the APR which includes things like interest rates and fees. Do some comparison shopping and choose a reputable lender that can help make your financial dreams a reality with quick access to low-interest rate funding.