2 min read
Definition
A breakage cost (or break cost) arises when you repay a fixed-rate loan before its fixed period ends. The lender priced its funding around your fixed term, so it charges for the interest and any funding loss it incurs unwinding the position. It differs from a flat early-repayment charge in that it can vary with market rates.
In plain terms
Breaking a fixed rate can be expensive — the lender charges you for the deal it thought it had. Ask for the figure before you commit to exiting.
Why it matters for your company
Before refinancing a fixed-rate loan, request the breakage cost and net it off any saving. See fixed-rate period and early settlement figure.
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See indicative terms on business loans, or apply online in minutes.
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Fixed-rate period
A fixed-rate period is the stretch during which your rate is locked and payments are certain, after which the…
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An early repayment charge (ERC) is a fee some lenders apply when you clear a loan before the end of its term,…
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Early settlement figure
An early settlement figure is the exact amount to clear a loan before term — outstanding capital, accrued…
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Annualised cost
Annualised cost scales a short-term borrowing cost up to a yearly figure, exposing how expensive a brief but…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.