The Law Dictionary

Featuring Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed.


A penalty imposed on the borrower for the complete settlement of the loan before the expected payoff date. It is means of compensation for the lender as the potential interest income is not realized. Also, the possibility of the reinvestment of the complete loan amount at a potentially lower interest rate is extinguished. An average penalty is approximately equal to the interest payments for three months on the loan amount.

Share on facebook
Share on twitter


Nothing implied or stated on this page should be construed to be legal, tax, or professional advice. The Law Dictionary is not a law firm and this page should not be interpreted as creating an attorney-client or legal adviser relationship. For questions regarding your specific situation, please consult a qualified attorney.