What Are Redemption Charges

Early redemption charges are levied if you repay your loan in a certain period.

They are often found on deals with a special offer rate upfront - for example a fixed or discounted rate - and are designed to help the lender recoup the costs of setting up the deal. (Or, to be more cynical, these charges allow the lender to recoup in one hit all the profit they expected from the full duration of the loan.)

Usually, the charge is a percentage of the loan you are repaying, or a number of months' interest. Most charges are payable only during the special offer period, but in some cases they are levied beyond that - these are called overhanging redemption charges.