What is an origination fee on a car loan?



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    An origination fee (also known as a loan establishment or loan processing fee) is a one-off charge to set up a loan. Read on to find out everything you need to know about origination fees on car loans, including answers to FAQs.


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    Who pays the origination fee?

    An origination fee is paid by you as the borrower if your loan is approved. However, you don’t need to pay it upfront. It can be factored into your regular repayments if that is more convenient for you.

    How much is the origination fee?

    It varies depending on the type and size of the loan. Usually it is a small percentage of the total amount borrowed, or it can be a flat fee.

    What is the purpose of an origination fee?

    Approving and setting up a car loan is time-consuming for lenders in Australia. Australian lenders have a legal obligation to lend responsibly under our consumer credit legislation. This means that they must:

    • Enquire about and verify every applicant’s financial situation.
    • Make sure that the loan requested is “not unsuitable” for the applicant.

    This can involve conducting employment and credit checks on the applicant, as well as checking other documentation and information provided.

    If you decide to use the services of a finance broker, they will try and match you with the lender who will be more likely to approve your application. This is important because getting a loan application rejected can damage your credit score.

    Is it worth paying the origination fee?

    This depends on a range of factors, including the other terms and conditions of your loan. You shouldn’t baulk at paying an origination fee if the other loan fees and interest rate offered are lower than they are on loans without an origination fee. 

    And at the end of the day, you only pay an origination fee if your loan is approved. If you have a bad credit history, it may be worth paying the origination fee so that you can secure approval for the car finance that you need.

    How can I apply for a car loan?

    You can apply for a car loan online in less than 5 minutes if you have some key information handy. One of our brokers at National Loans will be able to review your application and suggest a suitable lender from our panel of lenders across Australia. These lenders include banks and other financial institutions.

    Importantly, we work for our car buying clients, not financial institutions. Our goal is to save you time and hassle in getting approved for a loan that will suit your needs. We can arrange pre-approvals in as little as an hour for suitable applicants.

    What information do I need to apply for a car loan online?

    Key information that you will need to provide includes:

    • The amount you want to borrow,
    • Proof of your identity,
    • Details of your living arrangements,
    • Proof of your income,
    • A breakdown of your monthly expenses,
    • Details of any current assets you own, and
    • Details of any current debts that you have.

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