Hard-Call Protection
Private Credit glossary · Documentation, Covenants & Terms
Definition
Prohibition or steep premium on prepayment during an early period (more common in bonds than loans).
Hard-Call Protection in plain English
When you lend money at a good interest rate, your worst enemy is the borrower paying you back early — because then your nice stream of interest payments stops and you have to find somewhere new to park the cash. Hard-call protection is a rule in the loan contract that either forbids early repayment for a set period or forces the borrower to pay a hefty penalty if they do. It's like locking in a phone plan with a big early-cancellation fee: it guarantees the lender keeps earning for a while. This is more common with bonds than with regular business loans.
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