Commitment Fee

Filed Under »
Dictionary Says

Definition of 'Commitment Fee'

A fee charged by a lender to a borrower for an unused credit line or undisbursed loan. A commitment fee is generally specified as a fixed percentage of the undisbursed loan amount. The lender charges a commitment fee as compensation for keeping a line of credit open or to guarantee a loan at a specific date in future. The borrower pays the fee in return for the assurance that the lender will supply the loan funds at the specified future date and at the contracted interest rate, regardless of conditions in the financial and credit markets.



Investopedia Says

Investopedia explains 'Commitment Fee'

A commitment fee is different from interest; although, the two are often confused. A commitment fee is separate from the interest rate that is charged by the lender on the loan. A key distinction is that the commitment fee is charged on the undisbursed loan amount, while interest is charged on the disbursed amount of the loan.

Articles Of Interest

  1.

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.

  2. Good Debt Vs. Bad Debt

    Is there really such a thing as good debt and bad debt? Read on to find out.

  3. Avoid The Generation Debt Trap

    There is a worldwide generation of young, educated individuals mired in unmanageable debt. Find out why.

  4. Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.

  5. Payday Loans Don't Pay

    Hold too tightly to this rescue line and you'll soon be drowning in debt.

  6. Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.

  7. Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.

  8. How Line of Credit Works

    A line of credit is an arrangement where a bank offers a maximum loan amount that the borrower can draw upon at any time. The borrower – which can be an individual, business or government ...

  9. Why Making Minimum Payments Gets You Nowhere

    Getting out of debt can be difficult, but paying off a minimum balance each month only makes things worse.

  10. Canada: A New Frontier For Real Estate Investors

    This property market is easy to access and provides profitable opportunities.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  2. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  3. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  4. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  5. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.

  6. Chartalism

    A non-mainstream theory of money that emphasizes the impact of government policies and activities on the value of money.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=fa2c5203887f43c9fe221157ed21b018