What is the Commitment Fee?

Commitment Fee refers to the fee charged by the creditor for unused credit to the borrower. The credit is not completely disbursed by the lender in one go to the builder or the borrower. The disbursal of loan is thus many times linked to the completion of the project. The borrower has to thus pay the commitment fee to the creditor as a charge for accessing the loan in future.

Generally, it is seen as a pledge given by one party to another to carry the operation of the loan in a particular way. The pledge or promise is written to ensure that all the terms and conditions of the loans so decided mutually are agreed to. In case of real estate, it stands for a promise made by the lender to the borrower to give the loan on the decided date and rate of interest.