# Prepayment Penalty

*Borrowing & Credit — Finicade finance glossary*

A prepayment penalty charges you for repaying a loan early, because early repayment costs the lender the interest it expected. It's typically a percentage of the balance or a set number of months' interest, often only during the first few years. Regulated US mortgages have largely eliminated them; commercial loans, some auto and personal loans, and many non-US mortgages have not. Check for one before making extra payments or refinancing, since it can wipe out the entire saving.

**Also known as:** early repayment charge, prepayment charge

**Related terms:** [Refinancing](https://finicade.com/glossary/refinancing), [Mortgage](https://finicade.com/glossary/mortgage), [Personal Loan](https://finicade.com/glossary/personal-loan), [Loan Modification](https://finicade.com/glossary/loan-modification), [Amortization](https://finicade.com/glossary/amortization)

Source: https://finicade.com/glossary/prepayment-penalty