Loan Proceeds

Full definition

Loan proceeds is the amount of money that actually arrives in your bank account (or is paid to a third party on your behalf). It is distinct from the loan amount (the total borrowed) when fees are deducted. Net vs gross proceeds: Gross loan amount: the total you borrow (the amount shown on your loan agreement as the principal). Origination fee: a percentage subtracted from the gross amount before disbursement (typically 1%-8%). Net loan proceeds: what you actually receive. Net proceeds = gross amount - origination fee. Example: You borrow $15,000 with a 5% origination fee. Origination fee = $750. Net proceeds = $14,250. But your repayment schedule is based on $15,000 (not $14,250). The effective APR reflects this - a $14,250 disbursement on a $15,000 loan obligation means the lender is effectively charging interest on $750 you never received. Why this matters when budgeting: If you need exactly $10,000 for a home repair, and your loan has a 4% origination fee, you need to borrow $10,417 to receive $10,000 in proceeds ($10,417 x 0.96 = $10,000). Apply for more than your needed amount to account for the fee, and confirm the net disbursement in the loan disclosure. Some borrowers are surprised when $9,600 arrives instead of the expected $10,000. Lenders with no origination fees: LightStream, Marcus by Goldman Sachs, SoFi, and Discover charge no origination fees, so loan proceeds equal the loan amount. This is a meaningful advantage - you receive the full borrowed amount and can precisely budget the expense.

• Origination fee
• Disbursement
• APR (Annual Percentage Rate)
• Amortization