What is a Commitment Fee?

Commitment fee refers to the fee paid by the borrower for the lender's commitment to provide funds.

Commitment fee

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Commitment fee refers to the fee paid by the borrower for the lender's commitment to provide funds.

Commitment Fee Chengnuofei

The bank issues a letter of commitment to the customer, promising to provide a loan within a certain amount. If the customer does not use the funds in the future, in order to make up for the loss of the bank that cannot use the funds at will due to the promised loan, the bank charges the customer for the commitment fee. Commitment rates are generally 0.125% to 0.25%. Commitment fees are calculated based on unexpended amounts and actual unexpended days, and are paid quarterly and semi-annually.

Commitment fee payable by the borrowing company = (revolving credit line-actual corporate loan amount) * commitment fee rate