# Loan Application Fee: Overview and Examples

## What Is a Loan Application Fee?

A loan application fee is charged to a potential borrower for processing and underwriting an application for a [loan](https://www.investopedia.com/terms/l/loan.asp), such as a mortgage or car loan. Although loan application fees may be required for all types of loans and are intended to cover the costs of loan approval, many observers consider them unnecessary or overly costly.

### Key Takeaways

*   A loan application fee is an up-front, usually nonrefundable charge for submitting a loan application, such as for a mortgage.
*   Some critics argue that application fees are unnecessary "garbage fees" that increase closing costs and line lenders' pockets.
*   Comparing fees can save you hundreds or even thousands of dollars, and you may even avoid paying an application fee to some lenders.

## Understanding Loan Application Fees

Borrowers may be charged a loan application fee. This up-front, usually nonrefundable fee is charged as part of submitting a loan application. Loan application fees will vary by lender, and many lenders will not charge a loan application fee at all.

Because most loan application fees are nonrefundable, they present a high risk for low-credit-quality borrowers. Therefore, borrowers should first do due diligence on their own credit score and the standard approval requirements for the type of loan they wish to obtain to ensure that the application fee will not be lost with a credit application rejection.

Borrowers should also seek to compare application fees across lenders. Loan application fees can vary significantly among different types of lenders, ranging from $0 to $500. Thus, researching loan options and application fees with various competitors can potentially save hundreds of dollars. Some lenders may also be willing to waive the application fee through negotiation or comparison to other competitor market fees.

## Special Considerations

Online lenders generally require the lowest application fee, thanks to automated processing that does not require some of the added expenses associated with traditional and in-person loan consultations. Loan application fees are typically most common in [mortgage](https://www.investopedia.com/terms/m/mortgage.asp) loans, which include many ad hoc fees in addition to the monthly interest. Working with a mortgage broker can increase the likelihood of a loan application fee because the broker works as an intermediary on behalf of both the borrower and the lender.

## Types of Loan Fees

Loan application fees are just one type of fee lenders can charge on a loan. Other fees may include an [origination fee](https://www.investopedia.com/terms/o/origination-fee.asp) and monthly service fees. Generally, fees help a lender cover costs associated with underwriting and processing a loan.

Mortgage loans tend to have the broadest fee requirements in the credit market. [Mortgage lenders](https://www.investopedia.com/mortgage/mortgage-guide/mortgage-lenders/) may charge origination fees, appraisal fees, and administration fees. In some cases, they may bundle their fees by charging a closing points fee, a comprehensive fee calculated as a percentage of the principal balance.

The loan application fee is sometimes considered a garbage or junk fee, which are often unnecessary charges and fees tacked onto mortgage [closing costs](https://www.investopedia.com/terms/c/closingcosts.asp) by lenders. Lenders do this to increase their own profit on the loan. There are a number of ways that lenders manage to fold [garbage fees](https://www.investopedia.com/terms/j/junk_fees.asp) into closing costs.

## How Much Does a Loan Application Fee Typically Cost?

Since there are no legal requirements or restrictions on what to charge, it's up to lenders to set application fees. While some lenders don't charge any application fee, others charge up to $500.

## What Additional Fees Might I Pay?

It depends on the type of loan you're applying for, but you might pay origination fees and documentation fees.

## Are Loan Application Fees Negotiable?

Some lenders allow you to negotiate application fees, but it's up to the lender. If being able to negotiate the fees is important to you, you may have to shop around and [compare lenders](https://www.investopedia.com/how-to-find-the-best-mortgage-lender-5194993).

## The Bottom Line

If you're taking out a loan, chances are you'll have to pay a loan application fee. This fee is a way for lenders to profit from your business. Because fees are charged at the discretion of the lender, the amount borrowers pay for loan application fees varies wildly. If you're shopping for a loan, don't forget to consider the application fee when weighing your options.

> **Article Sources**
>
> 1.  Consumer Financial Protection Bureau. "[What Are Mortgage Origination Services? What Is An Origination Fee?](https://www.consumerfinance.gov/ask-cfpb/what-are-mortgage-origination-services-what-is-an-origination-fee-en-155/)"