Prepayment Penalty
A prepayment penalty is a fee charged for paying off a loan early. It compensates the lender for lost interest income.
Prepayment penalties are more common in certain mortgages or business loans. Borrowers should review loan terms to understand if penalties apply.
Related Terms
Mortgage
A mortgage is a loan used to purchase real estate, where the property serves as collateral. The borr...
Refinance
Refinancing replaces an existing loan with a new one, often to change the interest rate or term. It ...
Interest
Interest is the cost of borrowing money or the return earned on deposited funds, typically expressed...
Principal
Principal is the original amount of money borrowed in a loan or the original amount invested. It doe...
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