Pre-Payment Penalty

The prepayment penalty is a fee that discourages you from paying off your loan early. If you do, the lender will charge an additional amount to counterbalance any potential losses they may incur. The borrower should also be aware that some lenders are more likely than others to offer these types of penalties when setting up their loans; it might not always make sense for them as much as it does in other cases where the risk and return on investment can't quite measure up against one another so easily like in mortgage lending which has been historically low-risk with high returns due. A prepayment penalty is a fee charged by a lender if you decide to pay off your loan before its full term or ahead of schedule under specific circumstances set forth within.