What is the line of credit capital charge?

The capital charge is a small annual fee that covers the cost of keeping your line of credit open. This is the only fee that Lava charges, and it’s based only on what you borrow. This allows Lava to continue to offer flexible loan options at the lowest rates in the industry.

The capital charge is applied to your balance, and you can pay it whenever you want to close your line of credit.

The capital charge is equal to 2% of the largest outstanding balance you have on your line of credit over the course of the year. It’s applied to your balance one year after your open your line of credit or when you close out your line of credit (whichever comes first).

Interest does not accrue on the capital charge during the year it’s applied. Interest will only begin accruing on the capital charge if your line of credit remains open into the following year, once it’s added to your new principal balance. You have the option to pay off your line of credit in full at anytime, in which case your capital charge will be settled automatically and nothing will carry over.

This fee is structured so that you can draw on your line of credit and pay down as much as you’d like throughout the year, but you only pay a fee on your max outstanding balance.

You can view your current estimated capital charge in your line of credit details page in the Lava mobile app or web app.

For example:

If your highest balance during the year is $500, your capital charge will be $10 (2% of $500).

If you borrow $200, pay it off, and later borrow $500, your charge is still based only on the largest balance you reached ($500), not on every time you borrowed.

You don’t pay the capital charge when you make payments during the year. It’s simply added at the end of the year (or when you close your line of credit). If you keep your line of credit open, that $10 charge will be rolled into your principal, giving you a new starting balance of $510.