What are "pre-payment penalties"?

What are "pre-payment penalties"?

James Bell (Publisher, Auto Reviewer) gives expert video advice on: What does "balloon payment" mean?; What does "base value" mean"?; What does "buy here, pay here" financing mean? and more...

With regards to financing your car, ‘pre-payment penalties' reflect additional fees or charges that will come if you go to pay off the loan earlier than the actual term. It's in the interest of the lender to keep you in that financing term through the full extent. So, if you want to pay off the finance early for whatever reason, he'll often charge additional fees being ‘pre-payment penalties' to allow you that benefit.