Loan Glossary

[twinklz]

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So I'm looking at all these different options for getting loans, and I have no idea what I'm looking at. Called my parents, and somehow my dad managed to pay off his student loans without knowing anything about it either!

So, what's an:

Origination fee?

Guarantee fee?

Supplemental fee at Repayment?

I understand capitalization, forebearance, the difference between alternative, subsidized and unsubsidized loans because they're explained everywhere. But these terms I haven't found an explanation for.

Any help will be rewarded with karma points 😀

 

[mpp]

Origination fees are fees charged to help pay for the administration of the loan. Gaurantee fees are charged to insure the loan (they protect the lender, not you).

Lenders are limited in the amount they can charge for these fees. There are plenty of lenders that don't charge any fees. Note that the fees are taken out of your loan balance which means that the real fee includes what is paid up front plus interest accrued. Some lenders will have you believe that you aren't paying a guarantee/origination fee by telling you that they will give you that money back after x number of on-time payments. This is not in your best interest since you will likely consolidate your loans upon graduation and never see the return of those fees.

In my opinion, the fees are just to make some money up-front as there are plenty of lenders that seem to get by without charging you those fees.

I've not heard of a 'supplemental fee at repayment' but I assume that is like an origination fee that you pay at repayment, meant to offest costs of adminstering the loan. I would stay away from lenders that charge these.

Read the fine print of all lender material before choosing that lender.