Prepayment/Commitment Reduction Fees Clause Samples

The Prepayment/Commitment Reduction Fees clause establishes charges that a borrower must pay if they repay a loan early or reduce their committed borrowing amount before the agreed schedule. Typically, this fee is calculated as a percentage of the prepaid or reduced amount and is intended to compensate the lender for lost interest or administrative costs. Its core function is to discourage premature repayment or reduction of commitments, thereby protecting the lender’s expected return and ensuring stability in the loan agreement.