Repayment

Repayment is the act of paying back money that has been borrowed or owed, typically according to the terms of a loan, credit agreement, or other debt instrument. It involves returning the principal and any interest or other charges on the outstanding balance. Repayment obligations occur in consumer finance (mortgages, auto loans, credit cards), student loans, corporate debt, and government or organizational loan programs. In some contexts, repayment can also refer to refunds of overpayments, but in finance it primarily denotes repaying a loan or debt.

Repayment arrangements specify a schedule of payments over a set term. Each payment typically includes interest and a portion of principal, a process called amortization. Some loans provide interest-only periods, balloon payments, or graduated repayment with rising payments. Prepayment, paying more than scheduled, can shorten the term and reduce total interest, but some contracts impose prepayment penalties or fees.

Delinquency or default can incur penalties, higher interest, collection actions, and adverse effects on credit scores. Lenders may require collateral or guarantees, or pursue restructuring of the loan. Some programs offer alternatives such as income-driven or extended repayment plans, refinancing, or forgiveness to improve affordability or manage risk.

Repayment is influenced by factors such as interest rates, loan term, borrower income, cash flow, and economic conditions. Understanding the repayment structure aids budgeting and financial planning.