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In NB, what should I know about prepayment penalty for car loans?
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Car Loan Glossary • nb

In NB, what should I know about prepayment penalty for car loans?

In New Brunswick, understanding prepayment penalties for car loans primarily depends on whether your agreement is an 'open' or 'closed' loan. Most auto financing falls under closed-end agreements, which means lenders expect to receive a specific amount of interest over the full loan term. For these closed loans, lenders are generally permitted to charge a penalty if you pay off the loan early, compensating them for lost interest revenue and administrative costs. While there isn't a federal cap on car loan prepayment penalties, New Brunswick's consumer protection legislation, specifically the *Cost of Credit Disclosure Act*, mandates that all terms, including any prepayment penalties, must be clearly outlined in your loan agreement. These penalties can vary significantly, often calculated as a fixed fee, a percentage of the outstanding balance, or a portion of the remaining interest. In a dynamic market like 2025, where interest rates might fluctuate, consumers often consider prepaying to save on interest or refinance; however, a substantial penalty could negate these potential savings. Therefore, it is critically important to meticulously review your specific loan contract and contact your lender directly to understand the exact penalty calculation and determine the true financial benefit of an early payoff.

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