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Definition
An early settlement charge is a fee for repaying a loan ahead of schedule. It compensates the lender for interest it expected to earn. Not all loans carry one — many reducing-balance facilities allow penalty-free early repayment.
Why it matters
It determines whether overpaying saves money. On a loan with a heavy charge, early repayment may not be worthwhile; without one, it usually is. Check before you borrow — see loan fees explained.
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