Retained interest (also colloquially known as a payout penalty) is future, currently unpaid, interest that some lenders add to the remaining principal of a loan to determine a payout figure in the event that the loan is terminated before the completion of the original term. When two parties enter into a loan agreement, the amount of interest payable over the term of the loan is calculated and then amortized across the loan repayments. Thus, each repayment can be considered to include two parts: one part repaying some of the principal of the loan, and the other paying interest.