Glossary
Establishment fee
Also called: application fee, setup fee
An establishment fee is a one-off charge for setting up a loan. In private lending it is often expressed as a percentage of the loan amount and is frequently deducted from the funds advanced at settlement rather than paid separately.
An example
A borrower's offer shows an establishment fee alongside the interest rate. At settlement the lender deducts the fee from the advance, so the borrower receives less than the loan amount but owes the full amount.
Why it matters
On a short loan, the establishment fee can make up a large share of the total cost. Comparing offers on rate alone can be misleading, which is why Privet's cost estimator adds fees and interest together over the expected term.
Points to check
Ask whether the fee is deducted from the advance, added to the loan or paid separately, and whether it is refundable if the loan does not proceed. A fee deducted at settlement reduces the funds you receive, so check that the net amount still covers what you need. Compare the fee with the term of the loan, because on a short loan it can be a large part of the overall cost.
Try it: Loan cost estimator