Documentation fee definition related to personal loans
What is a documentation fee?
A documentation fee is a charge assessed by a lender to cover the costs associated with loan processing, underwriting, and funding. Documentation fees are also sometimes called “loan origination fees” or “processing fees.”
This fee is generally a flat charge, typically ranging from $50 to $400, that is paid upfront when you submit your loan application. In some cases, the documentation fee may be rolled into the total loan amount and financed over the life of the loan.
How does a documentation fee differ from an application fee?
A documentation fee is a charge assessed by a lender to cover the costs associated with processing loan documentation. This may include such things as obtaining a credit report, preparing the loan agreement, and so on. An application fee, on the other hand, is a non-refundable charge assessed by the lender to simply cover the cost of processing the loan application.
How is a documentation fee generally structured?
When you take out a loan, the documentation fee is generally structured as a percentage of the total loan amount. The fee can vary depending on the lender and the type of loan you’re taking out. For example, a documentation fee for a $500 personal loan from LendingTree could be $50, while the same documentation fee on a $5,000 personal loan from Prosper could be $250.
Are there any alternatives to paying a documentation fee?
Most lenders will charge a documentation fee when you take out a personal loan. As stated before , this fee covers the cost of the lender preparing and sending your loan documents.
You may be able to find a lender who doesn’t charge a documentation fee, but they are likely to have other fees or charges that offset the savings. For example, they may charge a higher interest rate or require you to take out insurance on the loan.
If you are comparing loans from different lenders, make sure you compare all the fees and charges before you make a decision.
How can I avoid paying a documentation fee?
You can avoid paying a documentation fee by shopping around for a lender that does not charge this fee. Some institutions that frequently offer loans without documentation fees include credit unions and online lenders.
Bryan Robinson
Writer and editor
Bryan Robinson is a finance writer with expertise in lending and their interest rates, fees, contracts and more.
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