penalty
Also called: biaya penalti
A fine charged by the bank if the mortgage is paid off early or the agreement is cancelled.
What it means
A penalty is a fee charged if the customer breaches the credit terms, for example by paying off the loan faster than the tenor or paying an installment late. The amount is calculated based on a certain percentage of the remaining principal or the arrears. Penalty terms are stated in the credit agreement. Families need to read this section before signing.
Why it matters for families
A penalty can change a family's plan to pay off debt faster. If it is not understood, the extra cost can come as a shock and disrupt cash flow. Late-payment penalties can also add to the interest burden and pile up fines. Understanding penalties helps a family choose a wiser time for repayment.
Example
For example, a family wants to pay off the mortgage early and is charged a penalty of 2 percent of the remaining principal. If the remaining principal is Rp300 million, the cost is about Rp6 million. This amount needs to be calculated before deciding on early repayment. The actual percentage depends on the agreement.
Common misunderstanding
It is often assumed that paying off debt faster is always beneficial. The correction is that a penalty can reduce the interest savings.