Prepayment clause

Prepayment clause – in the area of Financial Law, the prepayment clause is sometimes detailed in money-loan contracts. This clause allows the borrower to pay back the whole amount of the debt (or bigger sum than the regular installments), earlier than the agreed deadlines. Upon payment of the total amount of the debt, even if paid earlier, his debt will be considered cleared in full. Sometimes such prepayment is not beneficial for the lender (because they expected to receive more interests), so in some contracts (usually related to mortgage loans) there is prepayment penalty, which is charged by the lender and which the borrower pays if he refunds the amount of the loan earlier.

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