Meaning of prepayment penalty | Babel Free

Definitions

An additional fee charged for paying off part of or the entirety of a loan ahead of the scheduled due date in order to compensate for the loss of interest income suffered by the creditor in such case.

Equivalents

Examples

“Prepayment penalties can be viewed as a necessary supplement to the escalating-payments feature: If borrowers prepay before the end of the low-rate introductory period and thus avoid the high post-reset rates, then the escalating-payments feature becomes moot.”

CEFR level