Early Termination
Early Termination is when a finance contract is ended before the agreed term. To finalise early, lenders require a Payout Figure and may charge Early Termination Fees. Early termination applies to Equipment Finance, Vehicle Finance, and Business Loans. Related terms: Exit Fees, Payout Figure, Loan Agreement.
Why Early Termination Matters
Ending a loan early gives businesses flexibility, but it can trigger fees depending on the finance structure. Understanding these costs helps avoid surprises and improves long-term cost planning.
- Allows refinancing or upgrading equipment sooner
- May include Early Termination Fees or interest adjustments
- Affects total cost of ownership
- Important for cashflow and asset planning
- Common when selling or replacing financed assets
How Early Termination Works
- The borrower requests a payout figure
- The lender calculates remaining principal + interest adjustments
- Fees may apply depending on the loan type
- The loan is discharged once payment is made
- PPSR security is released after finalisation
Early termination is often used during equipment upgrades or when refinancing to reduce repayments.
Official ref: asic.gov.au
Does early termination always cost money?
Not always, but most fixed-term finance contracts include fees or interest adjustments.
Why do lenders charge early termination fees?
Because ending a loan early changes the total interest expected over the full term.
How do I avoid high termination fees?
Choose flexible finance products or negotiate terms before signing.
Are early termination fees tax-deductible?
Some business-related fees may be deductible. Always confirm with an accountant.
Can I terminate a loan early to sell an asset?
Yes — the payout figure must be cleared before the asset can be transferred or sold.