How Much Does a Personal Loan Cost?

If you are planning to apply for a personal loan, you may be wondering how much it actually costs. The best personal loans are the ones with the lowest interest rates, easy repayment terms, quick funding, and most of all, the most affordable.

Before you fill out a personal loan application, it is important to consider all the costs and hidden charges involved. 

In this guide, we will reveal different types of personal loan fees and charges so you know what you’re getting yourself into and determine whether you can really afford a personal loan.

So read on.

How Much Does a Personal Loan Cost?

When you apply for a personal loan, you’ll find that there are various types of costs associated with the loan. These range from personal loan origination fees, interest rates, application fees, and other penalties.

Here’s a list of all the personal loan fees and other costs that you’ll have to pay when you opt for a personal loan:

1. Interest 

Interest, or annual percentage rate (APR), is one of the major costs associated with personal loans. It is the cost of borrowing money, which is calculated as a percentage of the principal amount that you borrow. Interest costs are applicable for the entire duration of your loan term. 

Mainly, there are two types of APRs, fixed-rate APRs and variable-rate APRs. As you can guess from their name, fixed-rate APRs have a fixed interest rate throughout your loan term. Whereas variable-rate APRs change according to the Prime Rate.

Most loans come with fixed APRs. Your exact personal loan interest rates are calculated according to your credit profile and market rates. It is calculated annually. 

But as you continue to repay your loan, the interest cost will be broken down into smaller payments that must be paid along with your monthly repayments. 

2. Application Fee

Many lenders charge a loan application fee to process the paperwork. It is a minimal fee charged up-front for underwriting your application. It is a non-refundable fee and is often considered unnecessary. 

Fortunately, you can avoid paying an application fee by checking out multiple lenders. There are many lenders that don’t charge application fees, allowing you to save a few hundred bucks. So make sure to look around and not settle for the first lender you find.

3. Origination Fee

A personal loan origination fee is an upfront fee that lenders charge to set up your loan. It is usually subtracted from your loan to pay for the processing and administration work involved in starting a loan.

An origination fee typically ranges between 1% to 5%. However, it is also charged as a flat-rate fee by some lenders. 

You can avoid a personal loan origination fee if you have an excellent credit score. With an excellent credit score, you can bag the best personal loans that don’t include any extra fees. Make sure to shop around to find a lender that doesn’t charge any upfront fees.

4. Late Payment Fee

If you fail to make your monthly repayments on time, you will be charged a late payment fee by your lender. You will also have to pay additional interest for a higher balance, making it harder for you to pay off your loan.

Some lenders do allow a grace period of up to 5 days after the due date has passed. However, every lender has different policies for late fees. So make sure to check your lender’s terms and conditions before signing the agreement. 

5. Prepayment Penalty

Many lenders have a prepayment penalty for borrowers who decide to pay off their loans early. This is because lenders are expecting interest payments for the complete term of your loan. 

When you decide to pay off your loan early, they won’t be getting the remaining interest that you owe them. Therefore, to make up for the missed earnings, they charge a prepayment penalty that can either be a flat rate or a percentage of your payoff balance.

Conclusion

So that’s all, folks. Now that you know about all the personal loan fees and other charges, you can account for all the expenses you’re in for when applying for a personal loan. Find out your personal loan interest rates from your lender to calculate the exact cost of the loan and determine whether you can really afford it.

Cash in Minutes offers the best personal loans in Utah at the most affordable prices. We have the most competitive interest rates in the market with easy loan terms. So apply now to get instant funding for your immediate cash needs.