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What is a personal loan origination fee—and how a good credit score can help you avoid this charge

Some personal loan lenders charge a one-time, upfront fee to borrow money. Here's how much that could cost you.

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Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

Personal loans can seem almost too good to be true, which is why you need to look closely to see all the ways that lenders make a profit by charging borrowers a variety of fees.

Origination fees are perhaps the most upfront way that lenders earn money off your personal loans. An origination fee is a one-time cost your lender subtracts from the top of whatever amount they lend you to pay for administration and processing costs. Usually, the fees range between 1% and 5%, but sometimes you're charged as much as 10%, or even a flat rate.

Here's an example: If you took out a $15,000 loan that had a 5% origination fee, your lender would charge $750 upfront before even giving you the money. When the money is deposited into your account, you'd only get $14,250. However, you'd still owe back the full $15,000, plus interest.

Here's a breakdown of this hypothetical scenario:

  • Total loan amount: $15,000
  • Origination fee: $750
  • Amount deposited to your bank account: $14,250
  • Repayment term: 36 months
  • Interest rate: 12.49%
  • Total interest paid over life of the loan: $1,099.17
  • Total lifetime cost of the loan (interest + origination fee): $1,849.17

Whenever possible, it's best to avoid origination fees. Maintaining a good to excellent credit score helps you qualify for loans that don't charge origination or administration fees. 

It's also important to do your research ahead of time. Don't just apply for the first loan you qualify for.

Select now offers a widget where you can put in your personal information and get matched with personal loan offers without damaging your credit score.

You can also opt to go to different lenders' websites and submit your information for prequalification. Lenders like Marcus and LightStream have prequalification forms on their websites. So do some budgeting/credit monitoring websites like Mint or WalletHub. You can also visit a lending platform (such as Upstart or LendingTree) to view multiple offers at once.

Personal loans with no origination fees

When compiling our list of the best personal loans, Select looked at key factors like interest rates, fees, loan amounts and term lengths offered, plus other features including how your funds are distributed, autopay discounts, customer service and how fast you can get your funds.

None of the lenders on our list charge early payoff penalties or upfront fees for processing your loan.

(Read more about our methodology below.)

Best overall

LightStream Personal Loans

On LightStream's secure site
  • Annual Percentage Rate (APR)

    2.49% to 19.99%* when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, auto financing, medical expenses, wedding and others

  • Loan amounts

    $5,000 to $100,000

  • Terms

    24 to 144 months*

  • Credit needed

    Good

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    None

See our methodology, terms apply.

Pros

  • Same-day funding available through ACH or wire transfer
  • Loan amounts up to $100,000
  • No origination fees, no early payoff fees, no late fees
  • LightStream plants a tree for every loan

Cons

  • Requires several years of credit history
  • No option to pay your creditors directly
  • Not available for student loans or business loans
  • No option for pre-approval on website (but pre-qualification is available on some third-party lending platforms)

Best for debt consolidation

Marcus by Goldman Sachs Personal Loans

On the Marcus by Goldman Sachs secure site
  • Annual Percentage Rate (APR)

    6.99% to 19.99% APR when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, wedding, moving and relocation or vacation

  • Loan amounts

    $3,500 to $40,000

  • Terms

    36 to 72 months

  • Credit needed

    Good

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    None

See our methodology, terms apply.

Pros

  • No origination fees, no early payoff fees, no late fees
  • Will send direct payment to up to 10 creditors (for debt consolidation)
  • Monthly VantageScore updates
  • Earn a one-month payment vacation (interest-free) after making 12 on-time consecutive payments
  • Ability to choose your due date when you accept the loan (and again up to two more times after that)

Cons

  • Does not accept joint applications and/or co-signers
  • Not the fastest funding (can take a week or 10 business days)
  • Slightly tougher approval requirements (especially for larger loans/lower interest)

Best for refinancing high-interest debt

SoFi Personal Loans

On Sofi's secure site
  • Annual Percentage Rate (APR)

    5.99% to 22.56% when you sign up for autopay

  • Loan purpose

    Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses

  • Loan amounts

    $5,000 to $100,000

  • Terms

    2 to 7 years

  • Credit needed

    Good to excellent

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    None

See our methodology, terms apply.

Pros

  • No origination fees, no early payoff fees, no late fees
  • Unemployment protection if you lose your job
  • DACA recipients can apply with a creditworthy co-borrower who is a U.S. citizen/permanent resident by calling 877-936-2269
  • Can have more than one SoFi loan at a time (state-permitting) 
  • May accept offer of employment (to start within the next 90 days) as proof of income
  • Co-applicants may apply

Cons

  • Applicants who are U.S. visa holders must have more than two years remaining on visa to be eligible
  • No co-signers allowed (co-applicants only)

Best for smaller loans

PenFed Personal Loans

Information about PenFed Credit Union Personal Loans has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
  • Annual Percentage Rate (APR)

    5.99% to 17.99% APR

  • Loan purpose

    Debt consolidation, home improvement, medical expenses, auto financing and more

  • Loan amounts

    $600 to $35,000

  • Terms

    1 to 5 years

  • Credit needed

    Good/Excellent

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    $29

See our methodology, terms apply.

Pros

  • Credit union membership available to anyone
  • Loans as low as $600
  • Can pick up a physical at a branch
  • May apply with a co-borrower

Cons

  • Funds come as a physical check
  • Must be a member to get funds (no membership needed to apply)
  • Must pay for expedited shipping to get your funds next day
  • Maximum loan amount of $35,000
  • Late fee of $29

Best for next-day funding 

Discover Personal Loans

Information about Discover Personal Loans has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. Discover Bank USA is a Member FDIC.
  • Annual Percentage Rate (APR)

    6.99% to 24.99%

  • Loan purpose

    Debt consolidation, home improvement, wedding or vacation

  • Loan amounts

    $2,500 to $35,000

  • Terms

    6 to 84 months

  • Credit needed

    Good

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    $39

See our methodology, terms apply.

Pros

  • No origination fees, no early payoff fees
  • Same-day decision (in most cases)
  • Option to pay creditors directly
  • 7 different payment options from mailing a check to pay by phone or app

Cons

  • Late fee of $39
  • No autopay discount
  • No cosigners or joint applications

Our methodology

To determine which personal loans are the best, Select analyzed dozens of U.S. personal loans offered by both online and brick-and-mortar banks, including large credit unions, that come with no origination or signup fees, fixed-rate APRs and flexible loan amounts and terms to suit an array of financing needs.

When narrowing down and ranking the best personal loans, we focused on the following features:

  • No origination or signup fee: None of the lenders on our best-of list charge borrowers an upfront fee for processing your loan.
  • Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan's term, which means your monthly payment won't vary, making your budget easier to plan.
  • Flexible minimum and maximum loan amounts/terms: Each lender provides a variety of financing options that you can customize based on your monthly budget and how long you need to pay back your loan.
  • No early payoff penalties: The lenders on our list do not charge borrowers for paying off loans early.
  • Streamlined application process: We considered whether lenders offered same-day approval decisions and a fast online application process. 
  • Customer support: Every loan on our list provides customer service available via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
  • Fund disbursement: The loans on our list deliver funds promptly through either electronic wire transfer to your checking account or in the form of a paper check. Some lenders (which we noted) offer the ability to pay your creditors directly.
  • Autopay discounts: We noted the lenders that reward you for enrolling in autopay by lowering your APR by 0.25% to 0.5%.
  • Creditor payment limits and loan sizes: The above lenders provide loans in an array of sizes, from $500 to $100,000. Each lender advertises its respective payment limits and loan sizes, and completing a preapproval process can give you an idea of what your interest rate and monthly payment would be for such an amount.

After reviewing the above features, we sorted our recommendations by best for overall financing needs, debt consolidation and refinancing, small loans and next-day funding.

Note that the rates and fee structures advertised for personal loans are subject to fluctuate in accordance with the Fed rate. However, once you accept your loan agreement, a fixed-rate APR will guarantee interest rate and monthly payment will remain consistent throughout the entire term of the loan. Your APR, monthly payment and loan amount depend on your credit history and creditworthiness. To take out a loan, lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more. 

*Your LightStream loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.99% APR with a term of three years would result in 36 monthly payments of $295.20.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.