Pricing
Early Repayment Charge (ERC)
An early repayment charge is a penalty fee applied when you repay a secured loan during its initial fixed-rate period. ERCs typically range from 1% to 5% of the outstanding balance.
ERCs exist to compensate the lender for breaking the fixed-rate term early. They're most common on 2-year and 5-year fixed-rate products, and they typically taper down over the fixed period — for example 5% in year 1, 4% in year 2, and so on.
If there's any chance you'll repay the loan early — through selling your property, remortgaging the first charge, or a lump-sum repayment — check the ERC schedule before committing. On a £40,000 loan with three years left on a 5-year fix at 3% ERC, that's a £1,200 charge if you redeem early.
Once the fixed period ends, ERCs no longer apply and you can repay any time without penalty. Some lenders allow capital overpayments of up to 10% of the loan per year without triggering an ERC, even within the fixed period. Always check the small print.