Glossary
Origination fee
An upfront charge (0–8% of the loan) deducted before funds reach you. A $10,000 loan with a 5% fee delivers $9,500 — but you repay all $10,000.
An origination fee pays the lender for underwriting and funding the loan, and it is usually taken out of the amount you receive rather than billed separately. That matters twice: you get less cash than the loan amount, and you still owe interest on the full amount. Always compare offers on APR, which includes the origination fee, rather than on the headline interest rate alone.
Related terms
- Promissory note The legal document where you promise to repay a loan under specific terms — amount, rate, schedule, and what happens on default.
- DTI Debt-to-income ratio: monthly debt payments divided by gross monthly income. Most lenders draw the line at 36–43%.
- Secured credit card A credit card backed by a cash deposit you make upfront — the deposit becomes your credit limit, and it is the standard tool for rebuilding credit.
- Balloon payment A large lump sum due at the end of a loan term, after years of smaller payments that didn't fully pay off the balance.
- Wage garnishment A court- or agency-ordered deduction taken directly from your paycheck to repay a debt — the end stage of an unresolved default.
- Bridge loan A short-term loan that "bridges" a gap — most often financing a new home purchase before your current home sells.