What does late payment fee mean?

A late payment fee in finance refers to a penalty or charge that is imposed when a borrower fails to make a required payment by the due date. This fee is typically outlined in the terms and conditions of a loan, credit card, or other financial agreement. The purpose of the late payment fee is to incentivize borrowers to make timely payments and to compensate the lender for the additional administrative costs and risks associated with late payments. Late payment fees can vary in amount and may be a flat fee or a percentage of the overdue amount. It is important for borrowers to be aware of the late payment fee associated with their financial obligations and to make every effort to make payments on time to avoid incurring this additional cost.