Additional Principal Payment

An additional principal payment refers to a borrower repaying more than the regular scheduled principal amount due, thus reducing the remaining balance on the loan.

If you, as a borrower, wanted to make additional loan repayments and the loan is on a fixed interest rate, you may be charged an additional fee to do so. Most lenders allow you to repay up to 5% of the principal balance each year without penalty, however anything above that may cost you.