Personal Loan APR Explained: How Lenders Calculate Your Rate

Personal loan APR (Annual Percentage Rate) is the total annualized cost of borrowing that includes both the interest rate and mandatory fees — primarily origination fees — expressed as a single percentage. APR is required by federal law under the Truth in Lending Act so borrowers can compare loan offers on equal terms. A personal loan with a 10% interest rate and a 5% origination fee over 36 months has an effective APR of approximately 13.4%, not 10%.

You apply for a personal loan and the lender advertises "rates from 6.99%." You get approved at 14.2%. Then you read the loan agreement and discover the APR is actually 17.8%. Three different numbers for the same loan — and only one of them tells you what you are actually paying.

Most guides on personal loan APR stop at "it includes fees." That is not useful. What you need is the actual math: which fees get folded in, how your credit score maps to specific rate tiers, and how to compare two loan offers when one has a lower rate but higher fees. That is what this guide delivers.

Key Takeaways

APR includes fees that the interest rate does not. Origination fees (1-8% of the loan) are the primary driver of the gap between your interest rate and APR on personal loans.
Every 1% origination fee adds roughly 0.6-0.7 percentage points to APR on a 3-year personal loan term.
Credit score tiers create discrete pricing bands: 720+ scores get 7-12% APR, 660-719 scores get 13-20% APR, and below 660 scores get 20-36% APR based on 2026 lending data.
APR alone is not enough to compare loans. Total cost of borrowing — monthly payment multiplied by number of payments minus principal — is the definitive comparison metric.
The average personal loan APR in March 2026 is approximately 12.3% across all credit tiers, per Federal Reserve data.

If you are unfamiliar with how APR works across all lending products, our complete guide to APR calculation covers the foundational math. Here, we focus specifically on personal loans — where origination fees, credit tier pricing, and term length create a more complex picture than most borrowers expect.

Interest Rate vs. APR for Personal Loans: Why They Are Never the Same Number

The interest rate on a personal loan is the base cost of borrowing — the percentage the lender charges annually on your outstanding principal. If you borrow $15,000 at a 10% interest rate, you pay $1,500 in interest during the first year (before accounting for amortization and monthly payments that reduce the balance).

The APR (Annual Percentage Rate) takes that interest rate and rolls in mandatory loan fees — primarily the origination fee — to produce a single annualized figure that reflects the true cost of the loan. Federal law requires this under the Truth in Lending Act (TILA), specifically Regulation Z, which mandates that every lender disclose APR using the same standardized formula so consumers can compare offers on equal footing.

Here is the critical distinction most borrowers miss:

On a personal loan with a 10% interest rate and a 5% origination fee over a 3-year term, the APR is approximately 13.4% — not 10%. The origination fee effectively raises the annualized cost by 3.4 percentage points because you receive $14,250 in your account but repay $15,000 plus interest.

TILA requires lenders to include these costs in the APR calculation:

Origination fees — the single largest APR inflator on personal loans (typically 1-8% of the loan amount)
Application fees — less common with online lenders in 2026, but some traditional banks still charge $25-$75
Underwriting fees — occasionally charged separately, though most lenders bundle this into the origination fee
Required insurance premiums — if the lender mandates credit life or disability insurance as a loan condition

What TILA does not require in the APR calculation: late fees, returned payment fees, or optional add-on products. These can add meaningful cost but are invisible in the APR figure. We cover these hidden costs in the comparison section below.

The Actual APR Formula

The simplified APR formula that lenders use for personal loans is:

APR = ((Total Interest + Total Fees) / Loan Amount) / Number of Days in Loan Term) x 365 x 100

For a $15,000 loan at 10% interest with a $750 origination fee over 36 months (1,095 days), the calculation works like this:

Total interest paid: $2,421.48
Total fees: $750
Combined finance charges: $3,171.48
Daily cost rate: ($3,171.48 / $15,000) / 1,095 = 0.000193
Annualized: 0.000193 x 365 x 100 = ~13.4% APR

In practice, lenders use the actuarial method specified by the Consumer Financial Protection Bureau (CFPB) under Regulation Z, which accounts for the exact timing of each payment. The simplified formula above gets you within 0.1-0.3 percentage points of the actuarial result — close enough for comparison shopping.

Understanding this distinction is essential for evaluating how lenders price risk. For a deeper look at how underwriters assess your application, see our guide on how personal loan underwriting works.

The Origination Fee Factor: How 5% Upfront Becomes 13%+ APR

Origination fees are the single most misunderstood cost in personal lending. They range from 1% to 8% of the loan amount depending on the lender and your credit profile, and they are almost always deducted from your disbursement — not added to the balance.

This means if you borrow $15,000 with a 5% origination fee ($750), you receive $14,250 in your bank account but owe $15,000 plus interest. You are paying interest on money you never received.

Worked Example: The Real Math Behind a $15,000 Loan

Let us walk through the exact calculation:

Loan amount: $15,000
Stated interest rate: 10.0%
Origination fee: 5% ($750, deducted from disbursement)
Term: 36 months
Monthly payment: $483.93 (calculated on the full $15,000 at 10%)

Your effective borrowing looks like this: you received $14,250, but your payment schedule is based on $15,000. The total amount repaid is $483.93 x 36 = $17,421.48. Your total cost of borrowing on the $14,250 you actually received is $3,171.48.

The effective APR on this loan is approximately 13.4%, not 10%. That 5% origination fee added 3.4 percentage points to the true annualized cost. On a 5-year term, the same fee would add about 2.1 points — the shorter the term, the more the fee inflates APR.

Here is how origination fees scale across common fee levels on a $15,000 loan at 10% interest over 36 months (calculations based on standard amortization formulas using the actuarial method):

Origination Fee	Fee Amount	Cash Received	Monthly Payment	Total Repaid	Effective APR
0% (no fee)	$0	$15,000	$483.93	$17,421	10.0%
1%	$150	$14,850	$483.93	$17,421	10.7%
3%	$450	$14,550	$483.93	$17,421	12.1%
5%	$750	$14,250	$483.93	$17,421	13.4%
8%	$1,200	$13,800	$483.93	$17,421	15.8%

The pattern is clear: every 1% of origination fee adds roughly 0.6-0.7 percentage points to the effective APR on a 3-year term. Lenders who advertise "low rates" but charge 6-8% origination fees are often more expensive than competitors with higher stated rates and no fees.

Not every lender charges origination fees. Online lenders like SoFi, LightStream, and Marcus by Goldman Sachs have eliminated them. Others — particularly those that lend to borrowers with fair or poor credit — rely on origination fees as a primary revenue source. Understanding this pricing structure is part of understanding how risk-based pricing works across the lending industry.

Amortized vs. Simple Interest: How Payment Structure Affects Your Total Cost

Before diving into credit tiers, you need to understand how interest accrues on your personal loan — because the method determines how much of each payment goes toward interest versus paying down your balance.

Amortized Interest (Most Personal Loans)

The vast majority of personal loans in 2026 use amortized interest. Your monthly payment stays constant, but the split between interest and principal shifts over the life of the loan. Early payments are interest-heavy; later payments are principal-heavy.

Here is what amortization looks like on a $10,000 loan at 10% interest over 36 months (monthly payment: $322.67):

Month	Payment	Interest Portion	Principal Portion	Remaining Balance
1	$322.67	$83.33	$239.34	$9,760.66
6	$322.67	$73.44	$249.23	$8,563.71
12	$322.67	$62.60	$260.07	$7,251.98
24	$322.67	$38.83	$283.84	$4,376.18
36	$322.67	$2.67	$320.00	$0.00

Key insight: In month 1, 25.8% of your payment goes to interest. By month 36, only 0.8% does. Total interest paid over the full term: $1,616.12. This front-loading of interest is why paying off a loan early saves you disproportionately more than the remaining months would suggest.

Simple Interest (Less Common)

A small number of lenders use simple interest, where interest is calculated only on the original principal balance — not the declining balance. On the same $10,000 loan at 10% over 36 months:

Monthly interest: $83.33 (constant every month)
Total interest paid: $3,000
Total repaid: $13,000

That is $1,384 more in interest than the amortized version of the same loan. Simple interest loans are rare among mainstream personal lenders, but they still appear at some credit unions and subprime lenders. Always confirm whether your loan uses amortized or simple interest before signing — the difference is substantial.

How Your Credit Score Maps to Personal Loan Rate Tiers

Personal loan lenders do not set your rate on a smooth sliding scale. They use pricing tiers — discrete credit score bands where everyone in the band receives rates within the same range. Move from one tier to the next, and your rate can jump (or drop) by several percentage points.

Based on 2026 lending data across major personal loan platforms, here is how the tiers typically break down:

Tier 1: Credit Score 720 and Above — APR Range: 7% to 12%

This is prime territory. Borrowers with scores above 720 receive the best advertised rates, and those "rates from 6.99%" in lender marketing materials are almost exclusively reserved for this group. Within this tier:

760+: Rates of 7-9% with no origination fee from top-tier lenders
720-759: Rates of 9-12%, origination fees of 0-2% depending on lender
Approval rates: Exceeding 80% at most lenders
Typical loan amounts: $5,000-$100,000 available

2026 benchmark: The average personal loan APR for borrowers with credit scores above 720 is 10.3%, according to the Federal Reserve's G.19 Consumer Credit report. This represents a 0.4-point decrease from mid-2025 as competition among online lenders has intensified. For context, the national average across all credit tiers is approximately 12.3% as of March 2026, per Federal Reserve data.

Tier 2: Credit Score 660-719 — APR Range: 13% to 20%

The near-prime tier is where the majority of personal loan borrowers land. Lenders view this group as moderate risk — creditworthy enough for unsecured lending, but priced to compensate for higher expected default rates:

700-719: Rates of 13-16%, often with origination fees of 1-3%
660-699: Rates of 16-20%, origination fees of 2-5%
Approval rates: 50-70% depending on debt-to-income ratio and employment history
Maximum loan amounts: Typically capped at $35,000-$50,000

The jump from Tier 1 to Tier 2 is the most expensive threshold in personal lending. A borrower with a 721 score might receive a 12% APR; a borrower with a 719 score from the same lender might receive 15%. That 2-point credit score difference translates to thousands of dollars over the life of the loan.

Credit score is not the only factor in this tier. Your debt-to-income (DTI) ratio independently affects pricing — two borrowers with identical 700 scores can receive rates 2-4 percentage points apart if one has a 20% DTI and the other has a 40% DTI. Most lenders cap personal loan approval at 43-50% DTI, and borrowers below 36% DTI consistently receive rates at the lower end of their credit tier. For a detailed breakdown, see our debt-to-income ratio guide.

If your score sits in this range, our guide on getting a personal loan with a 650 credit score covers specific strategies for improving your rate.

Tier 3: Credit Score Below 660 — APR Range: 20% to 36%

Subprime personal lending is a high-cost market. Borrowers in this tier face rates that can approach credit card territory:

620-659: Rates of 20-28%, origination fees of 3-8%
580-619: Rates of 25-33%, limited lender availability
Below 580: Rates of 30-36% (the legal maximum in most states), often with maximum origination fees
Approval rates: Below 30% at mainstream lenders; higher at subprime specialists
Maximum loan amounts: Typically $1,000-$15,000

The cost gap in real dollars: On a $10,000 personal loan over 36 months, a Tier 1 borrower at 9% APR pays $1,427 in total interest. A Tier 3 borrower at 30% APR pays $5,547 in total interest — nearly four times as much. The credit score difference between these two borrowers might be as little as 100 points.

These tiers are not arbitrary. They are driven by actuarial default data — lenders set rates at levels where the expected revenue from performing loans covers the expected losses from defaults within each tier. According to Federal Reserve charge-off data, personal loan default rates for subprime borrowers (below 660) run 3-5x higher than for prime borrowers (above 720), which directly explains the 2-3x APR differential between tiers. This is the core of risk-based pricing.

Fixed vs. Variable Rate Personal Loans: What the 2026 Market Looks Like

Approximately 90% of personal loans issued in 2026 are fixed-rate, according to TransUnion consumer lending data. There is a practical reason for this: the Federal Reserve's sustained period of elevated interest rates has made variable-rate exposure genuinely risky for borrowers.

Fixed-Rate Personal Loans

Your interest rate and monthly payment remain constant for the entire loan term. What you see at signing is what you pay. The advantages are straightforward:

Predictable budgeting: Your payment in month 1 is identical to your payment in month 36 or month 60
No rate risk: If the Fed raises rates, your cost does not change
Simpler comparison shopping: APR is the APR for the life of the loan

Variable-Rate Personal Loans

Variable-rate personal loans are tied to a benchmark — typically the Prime Rate or SOFR (Secured Overnight Financing Rate) — plus a fixed margin. When the benchmark moves, your rate moves with it.

Variable-rate personal loans typically start 1-3 percentage points below equivalent fixed-rate offers. As of March 2026, this looks like:

Fixed rate offer: 12.0% APR
Variable rate offer: 9.5% APR initial (Prime + 1.0%), with a rate cap of 18%

The math on when variable rates make sense is precise:

Break-even calculation: If a variable rate starts 2.5 points below the fixed alternative, and the benchmark rate increases by 0.25% per quarter, the variable loan becomes more expensive than the fixed alternative after approximately 20 months. For a 36-month loan, that means 16 months of higher payments — costing an additional $400-$800 on a $15,000 loan.

The bottom line for 2026: choose fixed unless you plan to repay the loan within 12-18 months and the variable discount exceeds 2 percentage points. The rate environment does not favor betting on declining rates for the typical 3-5 year personal loan term.

The True Cost Calculation: A $15,000 Loan at Different APRs

APR is the standardized comparison tool, but what borrowers actually care about is total dollars paid. The following tables show our calculated comparison of a $15,000 personal loan at different APR levels across common term lengths, using standard amortization schedules:

36-Month Term

APR	Monthly Payment	Total Interest Paid	Total Amount Repaid
8%	$470.05	$1,922	$16,922
12%	$498.21	$2,936	$17,936
16%	$527.26	$3,981	$18,981
20%	$557.25	$5,061	$20,061
28%	$620.20	$7,327	$22,327
36%	$687.68	$9,757	$24,757

60-Month Term

APR	Monthly Payment	Total Interest Paid	Total Amount Repaid
8%	$304.15	$3,249	$18,249
12%	$333.67	$5,020	$20,020
16%	$364.77	$6,886	$21,886
20%	$397.53	$8,852	$23,852
28%	$467.72	$13,063	$28,063
36%	$543.96	$17,638	$32,638

Three patterns emerge from this data:

Pattern 1: The term multiplier. Extending from 36 to 60 months at the same APR nearly doubles the total interest paid. At 16% APR, you pay $3,981 in interest over 3 years vs. $6,886 over 5 years — a $2,905 difference for the convenience of lower monthly payments.

Pattern 2: The high-APR tax. At 36% APR over 60 months, you repay $32,638 on a $15,000 loan — more than double the original amount. The interest alone ($17,638) exceeds the principal.

Pattern 3: The sweet spot. For most borrowers, a 36-month term at 12-16% APR hits the practical balance — monthly payments between $498-$527 are manageable for a median household, and total interest stays below $4,000.

If your current loan falls in the higher APR tiers, it may be worth evaluating whether refinancing makes sense based on your current credit profile.

What APR Does Not Tell You: Known Limitations

APR is the best standardized comparison tool available, but it has real limitations that borrowers should understand:

APR assumes you hold the loan to maturity. If you pay off early, the effective cost differs from the quoted APR — especially when origination fees are involved. A 5% origination fee on a loan you repay in 12 months has a far greater annualized impact than on a loan held for 60 months.
APR does not reflect daily vs. monthly compounding differences. Two loans at identical APRs can produce slightly different total costs depending on whether interest compounds daily (most online lenders) or monthly (some credit unions). The difference is typically small — $20-$50 per year on a $15,000 balance — but it compounds over longer terms.
APR excludes optional costs that can be significant. Payment protection insurance, late fees, returned payment fees, and credit monitoring add-ons are excluded from APR calculations under TILA. For borrowers who occasionally miss payments, these costs can add 1-3% to the effective annual cost.
State-level rate caps affect available APRs. Some states cap personal loan rates below the federal 36% ceiling. Borrowers in states with 24% or 30% caps may find fewer lender options but are protected from the highest-rate products.

These limitations do not make APR useless — it remains the single best number for loan comparison. But informed borrowers supplement APR with total cost of borrowing calculations, which we cover next.

How to Compare Personal Loan Offers: APR Is Not Everything

APR is the best single number for comparing personal loans, but it is not the complete picture. Two loans with identical APRs can cost you different amounts depending on factors that TILA does not require in the APR calculation.

Factor 1: Loan Term Length

As the tables above demonstrate, a 14% APR over 36 months costs $3,402 in interest on $15,000. The same 14% APR over 60 months costs $5,933 — 74% more interest for the same rate. Always compare total cost of borrowing, not just APR.

The calculation to run: monthly payment x number of payments - loan amount = total interest cost. This is the number that determines which loan is actually cheaper.

Factor 2: Prepayment Penalties

Most online personal lenders in 2026 do not charge prepayment penalties, per CFPB guidance. But some credit unions and traditional banks still do — typically 1-2% of the remaining balance if you pay off early within the first 12-24 months.

This matters because borrowers often plan to refinance or pay off a personal loan ahead of schedule. A loan at 16% APR with no prepayment penalty that you pay off in 18 months can be cheaper than a loan at 14% APR with a 2% prepayment penalty paid off on the same timeline.

Worked example: $15,000 loan, 36-month term, paid off at month 18:

Loan A: 16% APR, no prepayment penalty. Interest paid through month 18: ~$2,103. Total cost: $2,103.
Loan B: 14% APR, 2% prepayment penalty. Interest paid through month 18: ~$1,820. Remaining balance at month 18: ~$8,200. Penalty: $164. Total cost: $1,984.

In this case, the lower-APR loan with the penalty is still cheaper — but the gap narrows dramatically. On larger loan balances or higher penalty percentages, the cheaper-APR loan can become more expensive.

Factor 3: Late Fee Structures

Late fees are not included in APR, but they are a real cost for borrowers who occasionally miss payment windows. Common structures include:

Flat fee: $15-$39 per late payment (most common)
Percentage-based: 5% of the payment amount
Grace period variation: Some lenders allow 10-15 days past due before charging; others charge on day 1

If you have historically made 1-2 late payments per year, a lender with a 15-day grace period and a $15 flat fee can save you $100-$200 annually compared to a lender with no grace period and a $39 fee — potentially offsetting a 0.5-1.0 point APR difference.

Factor 4: Funding Speed and Disbursement Method

This is not a cost factor in dollar terms, but it affects your effective borrowing cost if timing matters. Some lenders fund within 24 hours; others take 5-7 business days. If you are consolidating credit card debt at 24% APR, every day of delay costs you money — roughly $4.93 per day on a $7,500 balance at 24%.

The Comparison Checklist

When evaluating personal loan offers side by side, compare these six data points:

APR (not the interest rate — the APR, which includes fees)
Total cost of borrowing (monthly payment x number of payments - principal)
Origination fee percentage and whether it is deducted from disbursement
Prepayment penalty terms and duration
Late fee amount and grace period length
Funding timeline if you are consolidating high-interest debt

For a broader perspective on how to evaluate whether any loan product fits your financial picture, visit our personal loans hub for guides covering specific scenarios, credit tiers, and lender comparisons.

7 Ways to Lower Your Personal Loan APR

APR is not a fixed number you have to accept. These strategies can meaningfully reduce the rate you receive — some before you apply, others during the application process.

1. Improve Your Credit Score Before Applying

Moving from a 690 to a 720 credit score can drop your APR by 3-7 percentage points — the single largest rate lever available to most borrowers. The fastest moves: pay down credit card balances below 30% utilization (impact visible within 30-45 days) and dispute any inaccurate derogatory marks on your credit report. If you can wait 60-90 days before applying, even modest credit improvement pays for itself many times over.

2. Lower Your Debt-to-Income Ratio

Paying off a credit card or small loan before applying reduces your DTI, which directly affects the rate lenders offer. A DTI drop from 40% to 30% can improve your offered APR by 1-3 percentage points at most lenders. See our DTI ratio guide for specific strategies.

3. Add a Creditworthy Cosigner

A cosigner with a higher credit score and strong income lets the lender underwrite the loan against the stronger profile. This can reduce your APR by 2-5 percentage points — sometimes more for subprime borrowers. The cosigner assumes equal liability for the debt, so this is not a decision either party should take lightly. Some lenders, including SoFi and LightStream, offer cosigner release after 24-48 months of on-time payments.

4. Choose a Shorter Loan Term

Lenders typically offer lower rates on shorter terms because their risk exposure is shorter. A 24-month term often comes with a rate 0.5-1.5 percentage points lower than a 60-month term from the same lender. The trade-off is higher monthly payments, but the total interest savings are substantial — as the cost tables above demonstrate.

5. Borrow Less

Some lenders tier their rates by loan amount. Borrowing $7,500 instead of $15,000 may qualify you for a lower rate band — and the smaller principal means less total interest regardless. Only borrow what you actually need.

6. Shop at Least 3-5 Lenders

According to the CFPB, borrowers who compare offers from multiple lenders save an average of $300-$1,200 over the life of their loan. Most personal loan lenders offer prequalification with a soft credit pull that does not affect your score. There is no reason not to compare. Rate variation between lenders for the same borrower profile can exceed 5 percentage points.

7. Consider Secured or Collateral-Backed Loans

Offering collateral (a savings account, CD, or vehicle) reduces the lender's risk and typically lowers your APR by 1-3 percentage points compared to an unsecured personal loan. The downside: the lender can seize the collateral if you default. This approach works best for borrowers with assets who need a lower rate but have credit scores that push them into higher-rate tiers.

Frequently Asked Questions

What is the difference between interest rate and APR on a personal loan?

The interest rate is the base cost of borrowing — the percentage the lender charges on the principal balance. APR (Annual Percentage Rate) includes the interest rate plus mandatory fees like origination charges, folded into an annualized percentage. On a personal loan with a 10% interest rate and a 5% origination fee on a 3-year term, the APR typically lands around 13.4% — significantly higher than the stated rate. Federal law under TILA requires lenders to disclose APR so borrowers can compare offers on standardized terms.

How much does an origination fee increase my personal loan APR?

An origination fee directly inflates your effective APR because you receive less money than you borrow but repay the full amount. A 5% origination fee on a 3-year loan typically adds 2.5-3.5 percentage points to your effective APR. A 1% fee adds roughly 0.5-0.7 points. The shorter the loan term, the greater the APR impact of the same fee percentage. On a $15,000 loan at 10% interest, a 5% origination fee pushes the effective APR to approximately 13.4%.

What APR can I expect with a 700 credit score on a personal loan?

With a 700 credit score, you fall into the upper end of the 660-719 tier. Based on 2026 lending data, most borrowers in this range receive personal loan APRs between 13% and 20%. Borrowers closer to 719 with strong income and low debt-to-income ratios can land near the lower end. The jump to the 720+ tier — where rates drop to 7-12% — is one of the most valuable credit score thresholds to target. Compare at least 3-5 offers, as lender pricing varies significantly even within the same credit tier.

Should I choose a fixed or variable rate personal loan?

For most borrowers in 2026, fixed-rate personal loans are the safer choice. With the Federal Reserve holding rates elevated, variable-rate loans carry meaningful upside risk — a 2-point rate increase on a $15,000 loan adds roughly $900-$1,200 in total interest over 3 years. Variable rates only make sense if you plan to pay off the loan within 12-18 months and the initial rate discount exceeds 2 percentage points. Approximately 90% of personal loans issued in 2026 are fixed-rate, reflecting this market reality.

Why do two personal loans with the same APR cost different amounts?

APR standardizes the annualized cost but does not capture every variable. Two loans at 14% APR can differ in total cost due to loan term length (36 vs 60 months), prepayment penalty structures, late fee policies, and whether interest compounds daily or monthly. A 14% APR over 60 months costs $5,933 in total interest on a $15,000 loan — versus $3,402 over 36 months. Always compare total cost of borrowing, not just APR, by multiplying the monthly payment by the number of payments and subtracting the principal.

Can a cosigner lower my personal loan APR?

Yes. Adding a creditworthy cosigner — someone with a higher credit score and stable income — allows the lender to underwrite the loan against the stronger credit profile. This typically reduces APR by 2-5 percentage points. For example, a borrower with a 640 score might receive a 24% APR alone, but with a cosigner scoring 750+, that same loan could drop to 12-15% APR. The cosigner assumes equal legal responsibility for repayment, so both parties should understand the commitment before proceeding.

What is the difference between amortized and simple interest on a personal loan?

Most personal loans use amortized interest, where each monthly payment covers a declining portion of interest and an increasing portion of principal. Simple interest charges a fixed percentage of the original principal every month regardless of your remaining balance. On a $10,000 loan at 10% over 36 months, amortized interest costs approximately $1,616 total — while simple interest costs $3,000 total. That is an $1,384 difference on the same loan terms. Always confirm which method your lender uses before signing.