What is a personal loan origination fee and how much is it?

How origination fees work: If you borrow $10,000 and the lender charges a 3% origination fee ($300), you receive $9,700 in your bank account. But you owe $10,000 plus interest. This is why origination fees meaningfully affect the true cost - you are paying interest on $10,000 but only received $9,700. The effective cost is higher than the stated interest rate alone.

Where origination fees are most common: LendingClub: 3%-8% of loan amount. Upstart: 0%-12% (one of the highest in the market). Avant: administrative fee of 4.75%. Prosper: 1%-9.99%. Upgrade: 1.85%-9.99%. Marcus by Goldman Sachs: 0% (no origination fee). LightStream: 0%. SoFi: 0%. Discover Personal Loans: 0%.

How APR captures origination fees: The Truth in Lending Act (TILA) requires lenders to include all TILA-defined fees in the APR calculation. An origination fee is included. A lender with 0% origination fee but 14% interest rate vs a lender with 3% origination fee but 12% interest rate: the APRs tell you the true comparison. If the 3% fee loan has a higher APR (which it will), it is more expensive overall.

When origination fees are negotiable: Rarely negotiable with online lenders using algorithmic pricing. Sometimes negotiable at credit unions or community banks, especially for large loan amounts or existing customer relationships.

What to request instead: If an origination fee raises your loan cost, ask whether a different loan product (no-fee option) is available from the same lender at a slightly higher rate. Sometimes the total cost of a no-fee, slightly-higher-rate loan is lower than a fee-based, slightly-lower-rate loan - especially for shorter loan terms.