What is an Establishment Fee?

What is an establishment fee?

An establishment fee is an upfront charge added when you take out a new loan. It covers the lender’s cost of setting up the account, processing your application, and performing required checks. Some lenders also call it a loan establishment fee, loan application fee, or setup fee.

Why lenders charge establishment fees

Lenders charge establishment fees to:

• Cover the cost of processing loan documents
• Review identification and conduct a credit check
• Set up the loan account in their system
• Cover administrative and compliance duties

These establishment fees form part of the total cost of borrowing and can affect your overall repayments depending on the loan size.

Types of establishment fees

Not all establishment fees are the same. Lenders may use one of the following structures.

1. Flat fees

A fixed amount, regardless of the loan size.

Example: A flat $250 establishment fee applies whether you borrow $3,000 or $10,000.

2. Percentage-based fees

Calculated as a percentage of your loan amount.

Example: A 2% loan establishment fee on a $20,000 loan = $400.

3. Tiered fees

Different fee levels depending on the loan bracket.

Example:

• Loans $2,000–$5,000 → $200 fee
• Loans $5,001–$10,000 → $350 fee
  

4. Hybrid (mixed) fees

A combination of flat and percentage fees.

Example: $150 + 1% of the loan amount → For a $15,000 loan, fee = $150 + $150 = $300.

These structures are common across car loans, home loans, and personal loans.

Establishment fees by loan type

Here’s what you can generally expect across popular Australian loan categories.

Car loan establishment fee

Car loans often include:

• A flat or tiered establishment fee
• PPSR registration fees
• Dealership documentation costs

Typical range: $150–$600, depending on the lender and whether the car is new or used.

Home loan establishment fee

Home loans may charge:

• A single lender application fee
• Documentation fees
• Legal and settlement fees

Typical range: $0–$1,000, depending on the lender. Promotional offers sometimes waive these.

Personal loan establishment fees

Personal loans usually include:

• A flat establishment fee
• A fixed monthly fee (separate from setup costs)
• A chosen interest rate

Typical range: $0–$400, depending on loan size and type.

Mortgage establishment fees

Mortgage lenders may include:

• Valuation fees
• Settlement fees
• Legal preparation fees
• Application fee (sometimes waived)

These vary widely, especially across brokered products.

What’s included in an establishment fee?

Although different lenders use different names (e.g., loan application fees, lending establishment fee, rate account and services establishment fee), they typically cover the same core services:

Administrative processing

Setting up your loan, verifying details, and activating your account.

Document preparation

Preparing loan contracts, disclosure documents, and repayment schedules.

Credit checks and verification

Costs associated with confirming your identity, income, and credit history.

Compliance and legal work

Ensuring your loan meets regulatory obligations under the National Consumer Credit Protection Act.

System and account setup

Creating your loan record, repayment system, and customer profile.

These costs are bundled into a single setup fee so borrowers can easily understand the total upfront cost.

Impact on total loan cost

An establishment fee affects your loan cost in two ways:

1. Increased loan amount

Often, the fee is added to your principal loan balance.

Example: Borrow $5,000 with a $300 establishment fee → total borrowed becomes $5,300.

2. Increased interest

If the fee is added to the loan amount, you pay interest on it.

Example calculation

Loan amount: $7,000 Establishment fee: $300 Total borrowed: $7,300 Interest rate: 12% Term: 36 months

Approximate difference: You could pay $40–$60 more in interest over the term because the fee increases the principal.

This is why it’s essential to consider both the establishment fee and the comparison rate, which reflects the true cost of borrowing.

How to compare establishment fees

Establishment fees can vary widely, so it’s important to compare them carefully.

Understand the fee structure

A percentage fee may seem small but can be expensive with large loans. A flat fee might be cheaper for larger loans but costlier for small ones.

Read comparison rates

Comparison rates combine:

• Interest rate
• Establishment fee
• Most mandatory charges

A low advertised rate doesn’t always mean a cheaper loan if the establishment fee is high.

Watch out for hidden costs

Look for terms like:

• “Documentation fee”
• “Administration fee”
• “Processing fee”

These may be added on top of establishment fees and increase the total cost.

Check negotiation opportunities

Some lenders may waive establishment fees for:

• Larger loans
• Long-term customers
• Bundled products
• Promotional periods

It never hurts to ask if a fee can be reduced or waived.

Pros and cons of establishment fees

Pros

• Clear upfront cost
• Covers application and legal processing
• Standardised across many lenders
• Sometimes negotiable
• Included in comparison rates for transparency

Cons

• Increases the amount you borrow
• Adds to total interest costs over time
• Fees vary significantly between lenders
• May be charged alongside other setup fees

You don’t always need to pay an establishment fee. Meet Credit24

At Credit24, establishment fees depend on the type of personal loan you choose — meaning you may or may not pay an establishment fee, depending on your loan category and amount. Our goal is to keep fees understandable, fair and transparent.

Types of Credit24 personal loans

• Small personal loans
• Medium loans
• Larger personal loans
• Line of Credit

Each option has its own fee structure, always displayed clearly before you apply.

Why customers choose Credit24

• Clear fees, no hidden surprises
• Fast online application
• Flexible loan options
• Money sent fast once approved
• Supportive team when you need help

Apply now