Arrangement fee
A one-off set-up charge that makes a loan cost more than its headline rate suggests.
LoanCalc Lab editorial · Last checked
Definition
An arrangement fee is a one-off charge for setting up a loan. It may be taken from the money paid out to you, added to the loan, or paid separately. Many UK personal loans have no arrangement fee; where there is one, it is part of the cost of credit and is included in the APR.
Worked EXAMPLE (checked Oct 2026)
£10,000 over 60 months at 6.98% (the Bank of England’s September 2026 average quoted rate for a £10,000 personal loan) with a £300 fee taken from the advance:
- You receive £9,700 EXAMPLE.
- You repay about £197.92 a month, £11,875.06 in total EXAMPLE.
- The effective rate on the cash you actually get is about 8.27% EXAMPLE, around 1.29 points above the headline.
Run your own figures in the loan APR and true cost calculator.
Common mistakes
- Comparing headline rates when only one of the loans has a fee.
- Forgetting that a fee deducted up front means you borrow more than you receive.
- Refinancing to save interest without counting the new loan’s fee.
What it is not
This definition is illustrative and is not a quote or advice. LoanCalc Lab is not a lender. Last checked 14 October 2026.