An origination fee is a charge some lenders apply for processing a new loan, often taken from the loan proceeds or added to the balance. It is part of the cost of borrowing and is commonly reflected in the APR.
An origination fee covers a lender's cost of underwriting, processing, and funding a new loan. It is frequently expressed as a percentage of the loan amount or as a flat charge, and it may be deducted from the funds you receive or added to the amount financed. Because it is a required cost of obtaining the loan, an origination fee is generally included in the annual percentage rate (APR) disclosure, which makes the APR a useful figure for comparing offers. Whether a loan carries an origination fee, and how it is charged, varies by lender and product and is stated in the loan's fee disclosure. It is sometimes called a processing fee or an administration fee.
