Alternate name: A loan application fee may sometimes be lumped into “loan origination fees” or “loan processing fees.”
As a borrower, you might decide that paying a loan application fee is worth it if you find the rest of the loan terms favorable, or have a better chance of qualifying with that particular lender if you accept the fee.
How Do Loan Application Fees Work?
Loan application fees, when charged by a legitimate lender, are flat-rate costs that should be fully disclosed. Once a borrower submits their application, they may have to pay the application fee upfront. Or, in some cases, such as with a mortgage, the borrower may be responsible for the loan application fee (along with other costs) at closing. Lenders are legally allowed to charge application fees, but be cautious of any companies that make guarantees or promises about their loan products without reviewing your credit history first, or those that demand upfront payments. Those could be scams.
Loan Application Fee vs. Loan Origination Fee
When working with a lender, you may also hear the term “loan origination fee.” This refers to an amount you are charged for the loan processing. Sometimes, a loan application fee may be bundled into the total cost of the loan origination fee, and you’ll see it mentioned in an itemized list; in other cases, the fees may be charged separately. Here are some key differences between the two fees.
How Much Do Loan Application Fees Cost?
Loan application fees vary, and can depend on the type of loan. For example, a mortgage or refinance loan application fee could be as much as $500 or more. For a smaller personal or auto loan, a typical loan application fee might be around $25 to $50. Don’t forget that you may have some room to negotiate with the lender. If a fee seems too high or unreasonable, trust your gut and keep shopping. It could be a red flag that the loan product or lender may not be the most consumer-friendly.
