An annual fee is a fee which a borrower must pay to a lender for the privilege of continuing the borrowing arrangement. The amount of the annual fee is often declared as an absolute amount at the beginning of the loan agreement. Sometimes, rather than an absolute amount, it may be declared as a percentage of the total amount of the original loan capital. Many financial institutions which charge an annual fee on their loans agree to waive that fee during the first year only.
Annual fees are fairly uncommon in the realm of personal loans and are more commonly associated with credit cards. Many credit card providers charge annual fees for the use of the card, every credit card provider charges different fees so its advisable to compare credit cards scheme before you opt in cashback credit card. In some cases, these fees are only payable if the loan has not been extensively used during the annual period. It is often not clearly defined how extensively the credit card has to be used in order to avoid the annual fee.
In relation to loans, it is very common for a borrower to have to pay arrangement fees initially, as the loan is being taken out. It is also quite common for the borrower to have to pay some fees at the end of the loan arrangement, as everything is being wound up. Annual fees are less common but not unknown.