Breakage Costs Loan Agreement

A down payment of the loan by the borrower eliminates the risk that the margin will try to compensate the lender for the risk of non-repayment. In these circumstances, the margin is not justified. Accordingly, from a borrower`s perspective, paragraph (a) of the standard definition of termination costs should always be amended to read: “interest (out of margin)”, as this could save the borrower a substantial amount of money if the borrower decides to make a down payment to the lender on a date other than an interest payment or repayment date. In the event that a borrower lends money and pays such a loan in advance, he may be required to pay a termination fee to the lender if he makes such payment on a date other than an interest payment date or a repayment date. Lenders typically borrow the money they advance from borrowers in the interbank market from other lenders by referring to the Johannesburg Interbank Interest Rate (JIBAR). There are different definitions of break-up or pause costs in the market. The Loan Market Association documents include the following definition of breakage costs with respect to a variable rate loan, so I don`t know that the lender has much control in these areas. They themselves are affected by the tax. My advice is simply to read the fine print, no matter how much credit you take.

@miriam98 – Well, don`t start from anything. Look at the terms of the agreement. The article proposes that the costs of the break be assessed to the lender and that they be passed on to the borrower. .

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