# Servicing Fee

The servicing fee is a fee earned by the protocol for processing loans, maintaining records, and monitoring collateral. The fee is quoted as an annualized rate applied to and deducted from any loan proceeds obtained as a result of a successful bid by a borrower. 

{% hint style="info" %}
While the servicing fee is nominally charged to the borrower, borrowers will take this into account when placing bids such that the economic burden of the fee will fall on both borrowers and lenders, (see [tutorial ](https://www.khanacademy.org/economics-finance-domain/ap-microeconomics/unit-2-supply-and-demnd/28/v/example-breaking-down-tax-incidence)on the economics of tax incidence at Khan Academy).
{% endhint %}

{% hint style="info" %}
Fixed fees have been shown to be economically efficient in contrast to bid-ask spread fees, which can lead to strategic behavior ([Jantshcgi et al, 2022](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4069827)).
{% endhint %}

<details>

<summary>Servicing Fee Example</summary>

* Servicing Fee = 0.5% per annum
* Term Repo Term = 4 weeks (28 days)
* Borrower Purchase Price (amount accepted in auction) = 100,000 USDC
* All fees calculated on an actual / 360 basis&#x20;
* Payable up-front by the borrower (no fees to lenders)

Servicing Fee = **38.88... USDC** = 100,000 USDC \* 0.005 \* 28 / 360&#x20;

</details>


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.term.finance/protocol/fees-and-penalties/servicing-fee.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.