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Usually, the commitment fee is paid following the conclusion of the credit agreement. However, if the amount is levied on the undistributed loan, it may be collected on a periodic basis.
A cost imposed by a lender onto a borrower as compensation for the lender's promise to lend is known in the financial sector as a commitment fee. Usually, commitment costs are connected to idle lines of credit or outstanding loans.
Because it has reserved the money for the client and is therefore unable to charge interest, the lender is paid for giving access to a possible loan through a commitment fee. Typically, a commitment fee is characterized as a fixed amount or a fixed proportion of the outstanding loan amount. Lender receives payment in the form of a commitment fee for guaranteeing a credit at a date in the future or for maintaining an open credit line.
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