Finance Glossary
Early Repayment Charge
A fee charged by some lenders if you repay a loan before the end of its agreed term. Early repayment charges compensate the lender for the interest they would have earned had the loan run its full course. Under UK consumer credit rules, you have the right to settle most loans early, but an early repayment charge may apply. For most short-term loans, early repayment reduces the overall interest paid.
Example
You take a 12-month loan but settle it after 6 months. The lender charges a 1-month interest penalty as an early repayment charge.
Related terms
Loan Term
The agreed length of time over which a loan must be fully re…
Interest Rate
The percentage of the loan principal charged by a lender for…
Total Amount Repayable
The complete sum you will pay back over the life of a loan, …
Loan Agreement
The legally binding contract between a borrower and lender t…
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