private-loan-checklist-implications

Private education loans often have application fees in addition to the loan interest rate. The Consumer Financial Protection Bureau (CFPB), in its CFPB Education Loan Examination Procedures (PDF)  notes that there are six general types of fees associated with private education loans:

• Origination fee – charged by the lender, offsetting the application processing cost, and added to the loan amount;
• Disbursement Fee – charged by the lender and added to the principal amount of the loan when it is disbursed;
• Deferment Fee – charged by the lender in exchange for the benefit of deferring a loan payment for a time period;
• Repayment Fee – charged by the lender at the onset of repayment and calculated based on the outstanding loan balance at the time loan repayment begins. Repayment fees have become rare.

Lenders may also provide you with information on both your interest rate and your annual percentage rate. These are not the same thing. The CFPB explains the difference this way:

“The interest rate is the cost of borrowing money expressed as a percentage rate. It does not reflect fees or any other charges you may have to pay for the loan. An Annual Percentage Rate (APR) is a broader measure of cost to you of borrowing money. The APR reflects not only the interest rate but also the points, broker fees, and certain other charges that you have to pay to get the loan, including certain of your closing costs. For that reason, your APR is usually higher than your interest rate.”