Also called: Break fee, Early termination cost
Break costs
Break costs are charges a lender applies when a fixed-rate facility is repaid or terminated before the end of its term, compensating for the interest the lender expected to earn and its funding position. They are separate from ordinary early payout administration fees.
What is a break costs?
Break costs are charges a lender applies when a fixed-rate facility is repaid or terminated before the end of its term, compensating for the interest the lender expected to earn and its funding position. They are separate from ordinary early payout administration fees.
Example
Paying out a five-year fixed equipment loan after 14 months might attract a break cost calculated on the remaining fixed term.
Why it matters
They can make an early refinance uneconomic, so ask for a written payout figure before committing to a switch.