# Origination Fee

> An origination fee is an upfront charge a lender adds for processing and funding a loan — typically a percentage of the amount borrowed — that raises the real cost of financing beyond the stated interest rate.

## Key takeaways
- An origination fee is an upfront charge — usually a percentage of the loan amount — for processing and funding a loan, and it raises your true cost above the stated interest rate.
- It's commonly deducted from your loan proceeds, so you receive less than the face amount even though you repay the full balance.
- Compare offers on APR rather than rate, since a higher origination fee raises your APR even when the interest rate stays the same.

## How an origination fee works

An **origination fee** is what a lender charges to process, underwrite, and fund
your loan. It's usually expressed as a **percentage of the loan amount** and is
charged once, at the start of the loan. Because it's a real cost of borrowing,
it pushes your effective cost — your **APR** — above the stated interest rate.

### How it's collected

Most lenders **deduct the fee from your loan proceeds**, so you receive less
cash than the loan's face value. Others add it to your balance or bill it
separately at closing. Either way, it's important to know which method applies so
you can budget for the actual amount that lands in your account.

### A concrete example

Imagine you're approved for a **$50,000** term loan with a **3% origination
fee**. The fee is **$1,500**. If it's deducted from proceeds, you'll receive
**$48,500** but still repay based on the full **$50,000**. That gap is exactly
why the fee raises your true cost.

### What to watch for

- **Compare on APR, not rate.** A loan with a lower interest rate but a steep
  origination fee can cost more than one with a higher rate and no fee.
- **Ask how it's charged** — deducted from proceeds vs. added to the balance —
  so you know your net funding.
- **Check for stacking fees.** Some products add separate processing,
  underwriting, or packaging fees on top of origination.

When reviewing offers with Hoss Capital, ask each lender to spell out the
origination fee and how it's collected so you can compare the real, all-in cost.

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