How to Negotiate Loan Fees

Failing to negotiate personal loan fees is like handing a cashier a $50 bill for a $25 purchase and walking away without change. You're leaving money behind if you don't at least attempt to lower loan fees. Here's how to do it.

What are loan fees?

Loan fees are the "extras" lenders charge you for a loan. For example, a personal loan might include origination fees and prepayment fees.

All fees must be outlined in a Truth in Lending Disclosure provided by the lender. This document breaks the loan down so you can see the total cost you will pay, including fees and finance charges. If you see a fee you don't recognize, ask the lender to explain it to you. 

Which loan fees can you negotiate?

Pretty much every fee associated with a loan -- from interest rates to origination fees -- is negotiable. The exceptions are fees set by your local or state government, like taxes or title and registration fees. 

Tips for negotiating loan fees successfully

Here are few insider tips that can help you get the most out of negotiating:

Improve your credit

Start by checking your credit score. The higher your score, the more likely lenders are to negotiate with you. A good credit score for a personal loan is generally 670 or above. If your score is lower, and you can wait to apply for a new loan, take steps to raise your credit score in order to strengthen your negotiating position.

Get pre-qualified with multiple lenders

Next, get pre-qualified with multiple lenders. This allows you to compare multiple lenders with different fee amounts.

Let's say your preferred lender wants to charge high fees. In this case, you can tell your preferred lender you're pre-qualified with another lender -- whose fees are lower. Your preferred lender may be willing to match or beat other lenders' fees in order to keep you as a customer.

Choose your preferred lender carefully

The lenders most likely to negotiate fees are online lenders, credit unions, local banks, and financial institutions you already frequent.

Generally, credit unions and small community banks don't have as many set-in-stone rules as larger lenders. Online lenders tend to have lower overhead costs and may also be open to discounting or cutting fees.

When possible, work with a financial institution you have worked with before. Your good reputation and relationship with the lender may give you leverage in negotiations.

Negotiate with confidence

Don't be shy. Ask the lender to discount or waive any fee that can legally be discounted or waived. Be honest about what you want. For example, you might say, "I'm cautious with my finances and am uncomfortable paying these fees." Then, be prepared to find another lender if you are shot down.

If you work with a local lender, try to meet with them in person. There are few negotiating tools more powerful than human connection. 

Negotiating loan fees is equal parts preparation (the research you're doing right now) and confidence (don't be afraid to make demands). After all, who would willingly pay more for a loan than they have to?

Still have questions?

Here are some other questions we've answered:

• What is a good interest rate for a personal loan?
• How long does it take to get a personal loan?
• How much personal loan can I get?