Loan Origination Fees

Everyone knows that, the wealthier you are, the less it costs to borrow money.  Some people focus on getting lower interest rates on loans as an incentive to improve their credit scores, but this is not the only difference in the cost of a loan.  Lenders can charge origination fees, equal to a percentage of the fee, before you even receive a penny of the borrowed funds.  If it is a secured loan, then that means that, before you can borrow, not only must you have enough income to make installment payments, but you must save enough money for upfront costs such as origination fees, before you even borrow.  The amounts that Florida law allows for origination fees are disturbingly high, but the amounts that lenders charge are usually nowhere near as high as the maximum the law allows.  If you have enough income to afford monthly payments on a home mortgage or other loan that you want to borrow, but you are not sure whether you can afford the upfront costs, contact a Miami debt lawyer.

What Are Loan Origination Fees, and How Expensive Are They?

Loan origination fees are a fee that a lender or loan broker charges immediately before the borrower receives the borrowed money.  As long as the origination fee falls within legally allowable amounts, the fee is not considered interest or a finance charge, so the lender can charge it separately from interest or finance charges.  The maximum amount that the loan originator can charge as an origination fee is four percent of the principal amount.  An exception is if the loan originator sells the loan to another creditor within 90 days of originating it.  In this case, the maximum allowable origination fee is 10 percent of the principal.  In practice, most origination fees on mortgages are less than one percent of the principal amount.

The Moral of the Story Is That Borrowing Money Is More Expensive Than You Think It Is

Origination fees are just one of the ways that lenders can legally nickel and dime borrowers out of more money than the borrowers were expecting to pay.  Although laws against predatory lending exist, predatory lending does not have a formal legal definition, and in practice, lenders can issue loans that borrowers have little chance of being able to repay.  In 2008 it was subprime mortgage loans on real estate purchases that tanked people’s finances, and more recently, laws have attempted to curb the payday loans on which low-income workers have relied for decades.  People still need to borrow, and only the richest people can get the lowest risk loans, so the rest of us are stuck charging our grocery purchases on buy now pay later (BNPL).  The good news is that you have the right to settle, borrow, or consolidate debts that you cannot pay.

Work With a Debt Lawyer About Expensive Debts

A South Florida debt lawyer can help you if you are broke after taking out a loan with an expensive origination fee.  Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.

Source:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0400-0499/0494/Sections/0494.0074.html