Loan Proceeds

Full definition

Loan proceeds are the net amount of funds that a borrower actually receives when a loan is funded, after any upfront fees (primarily origination fees) are deducted. How proceeds vs. principal works: If you take out a $15,000 personal loan with a 4% origination fee, the lender deducts $600 at funding and deposits $14,400 into your bank account. Your loan balance is still $15,000, and all repayment calculations (monthly payment, total interest) are based on the full $15,000 principal. Implication for borrowers: If you need exactly $15,000 to pay a contractor, a $15,000 loan with a 4% origination fee only delivers $14,400. You'd need to borrow approximately $15,625 to receive $15,000 net of the 4% fee ($15,625 x 0.96 = $15,000). Alternatively, choose a lender with a 0% origination fee where proceeds equal the full loan amount. Lenders with 0% origination fees: LightStream, SoFi, Marcus by Goldman Sachs, and Discover Personal Loans (subject to change; verify at time of application) do not charge origination fees, meaning proceeds equal the full approved loan amount. APR accounts for proceeds discrepancy: The APR calculation under TILA factors the origination fee into the effective rate. A loan with a lower interest rate but a high origination fee may have the same or higher APR as a loan with a higher rate and no fee. Always compare APRs, not just interest rates, to account for fees in the total cost.

• Origination fee
• APR (Annual Percentage Rate)
• Principal