What is the term for a fee charged to a borrower for paying off a loan before its due date?

The term for a fee charged to a borrower for paying off a loan before its due date is known as a prepayment penalty. This fee is typically included in loan agreements as a way for lenders to protect themselves from the loss of expected interest income when a borrower pays off their loan early. By imposing this penalty, lenders discourage borrowers from refinancing or paying off their loans prior to the agreed-upon schedule.

In contrast, pre-qualification refers to the initial assessment of a borrower's creditworthiness and ability to secure a loan, which does not involve any fees for early repayment. An interest charge is the cost of borrowing money, expressed as a percentage of the loan amount, which applies to the entire duration of the loan rather than specifically related to early payoff. A principal fee isn't a recognized term in lending practices; principal refers to the original amount of the loan that is borrowed, excluding interest.

Therefore, the correct term for the fee associated with early loan repayment is the prepayment penalty, as it explicitly addresses the financial consequence of fulfilling the loan obligation ahead of schedule.