Glossary

Origination fee

A setup fee, often a percentage, frequently deducted before funding.

An origination (or underwriting, administrative, or closing) fee is charged for arranging financing. It is commonly a percentage of the amount and is frequently deducted from the proceeds, so you receive less than the stated amount while repaying on the full amount. Fees matter more on short terms because they are spread over fewer months.

How it appears in a contract

Listed in the fee schedule; the agreement should state whether it is deducted from proceeds or added to the balance.

Worked example

A 2% fee on a $20,000 advance is $400, deducted: you receive $19,600. On a 26-week term, that fee alone adds several percentage points to the estimated APR.

Illustrative figures on stated assumptions; not quotes.

What to ask

• What is the fee in dollars, and is it deducted or financed?
• Are there other fees (ACH, monthly, closing, wire)?
• Is the fee refundable if the deal does not fund?

Related terms

APR (annual percentage rate) · Factor rate · Total payback · Buy rate · all terms