Out-of-Pocket Cost
Out-of-pocket cost summary:
Out-of-pocket costs are those that you have to cover with your own funds.
They can include copays for medical care or lender fees when you borrow money.
There may be out-of-pocket costs associated with personal loans or HELOCs.
Out-of-pocket cost definition and meaning
Expenses that you have to pay for with your own money are considered out-of-pocket costs.
In some cases, you have to pay out-of-pocket costs. For example, you might pay a $20 out-of-pocket copay when you visit your doctor. Other times, you might be able to cover the costs without dipping into your bank account, such as by having lender fees deducted from your loan.
Key concept: Out-of-pocket costs refer to the amount you're expected to pay from your funds.
More about out-of-pocket cost
Most personal loans and home equity lines of credit don’t require that you pay any out-of-pocket costs, even if there are fees for the loan.
For example, let’s say you’re approved for a $30,000 personal loan and the lender charges a 5% origination fee. Normally the lender would deduct the $1,500 fee from the loan before giving you the money. So you’d receive $28,500. You still have to repay $30,000 (plus interest). Because you didn’t have to come up with the $1,500, it’s an expense, but not an out-of-pocket expense.
Mortgages and home equity loans often work the same way.
You could cover loan costs with your own money and not have them deducted from the loan. That would make them an out-of-pocket expense.
Here are some examples of costs you might encounter that you have to pay out of pocket. Not all lenders charge the same fees.
Personal loan out-of-pocket cost examples
Upfront application fee when you apply for a personal loan
Expedited processing fee if you need the loan quickly
HELOC out-of-pocket cost examples
Upfront application fee when you apply for a HELOC
Appraisal fee so that the lender can verify the market value of your home
Annual maintenance fee for having the HELOC account open during the draw period
Debt relief out-of-pocket cost examples
Monthly maintenance fee charged by the bank where you have an account for building up funds for your creditors
The professional debt relief company’s fee, unless you negotiate your own debts
Out-of-Pocket Cost FAQs
What is the cost of a loan?
Loan costs primarily center on two things: Interest and fees. The interest rate on a loan represents the cost of borrowing money. Interest rates are largely determined by your credit history, though lenders may consider other factors when setting your rate. Fees—such as origination fees, application fees, credit check fees, late fees, or prepayment penalties—can add to your loan cost. The best ways to save money on loan costs are improving your credit to qualify for lower rates and choosing a lender that charges minimal fees.
What does the Achieve Debt Relief program cost? Are there membership fees?
Program fees range between 15-25% of the amount of enrolled debt to be resolved. Rates may vary depending on your state of residence. There are no membership fees to join Achieve Debt Relief, only the monthly or bi-weekly deposit needed for debt negotiations and settlements.
Does it cost money to close a HELOC?
HELOCs have fees, but they won’t necessarily come out of your pocket at the time you get the loan. You can roll the fees into the loan. The fees will be deducted from your loan before it is disbursed to you. There are HELOCs with no closing costs, but that just means they are charging other fees, such as a higher interest rate. Fees for a HELOC can be 2% to 5% of your loan amount.
Related Articles
Use a personal unsecured loan from Achieve, with no collateral, to consolidate high-interest rate debt, make home improvements, or fund a large purchase. Apply now.
Personal loans are one of the most versatile financial products on the market. Here are some of the surprising benefits and potential hazards.
A 30-year HELOC offers flexibility if you want to tap into your home equity to fund your financial goals. Learn how a 30-year HELOC works and how to get one.
Use a personal unsecured loan from Achieve, with no collateral, to consolidate high-interest rate debt, make home improvements, or fund a large purchase. Apply now.
Personal loans are one of the most versatile financial products on the market. Here are some of the surprising benefits and potential hazards.
A 30-year HELOC offers flexibility if you want to tap into your home equity to fund your financial goals. Learn how a 30-year HELOC works and how to get one.