guarantee fee vs. origination fee

[birdie]

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I'm a little green when it comes to loans, so help me understand: what is the difference between the guarantee fee and the origination fee? Are they the same thing?

 

[mpp]

A guarantee fee is charged as insurance for those that don't pay back their loans. An origination fee is charged for the administration cost of the loan. These fees are usually deducted immediately from the prinicpal loan amount. However, you can find lenders that do not charge these fees. Check the Financial Aid links thread...

 

[birdie]

How can a guarantee fee like 3% serve as insurance for a huge loan like 25K? 😕 Also, if I apply for a loan just to see at what interest rate I qualify, will I still be charged the origination fee if I cancel the loan? (like within a couple weeks until I decide which lender to go with)

 

[DesiInNyc]

birdie, i don't know the answer to your questions, but it may help to look through the sticky thread of this forum--it is an excellent way to learn the basics. two weeks ago, i didn't know jack about this stuff. now, thanx to all the previous posts here, i've got atleast a grasp 😉

be prepared to spend some time and use the search function. also, jump to sites like www.northstar.org and www.nowloans.org and look through their FAQs.

next time, specify which type of loan you are talking about, e.g. stafford vs. private, so people can better help you.

chiao!