How to Calculate a Loan Fee

How to Calculate a Loan Fee thumbnail
Calculating loan fees

Some loans require a loan origination fee to cover the cost of processing the application and disbursing funds to the borrower. Usually, the loan fee is added to the principal of the loan. Banks express the loan origination fee as a percentage of the loan principal.

Instructions

    • 1

      Determine the principal amount of the loan. The principal is the amount borrowed. For example, a person borrows $15,000 from Bank A.

    • 2

      Determine the loan origination fee percentage from the loan contract. The bank should disclose the loan origination fee to the borrower. Following the example above, Bank A charges a 3 percent loan origination fee on all loans.

    • 3

      Multiply the principal by the loan origination fee percentage to determine the loan origination fee. In the example, $15,000 multiplied by 3 percent (0.03) yields a loan origination fee of $450.

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