Prepayment Penalty

Written By Minh Tong
Feb 14, 2023
Facebook Share Icon LinkedIn Share Icon

A prepayment penalty is a fee imposed on a borrower who pays off their loan earlier than the agreed upon maturity date. 

This type of penalty is typically found in fixed-rate loans, such as mortgages, and is designed to compensate the lender for the potential loss of income from interest payments that would have been received if the loan had been held until maturity.

The amount of the prepayment penalty is often a percentage of the outstanding loan balance, and can range from a few percentage points to a substantial sum. The fee is usually calculated based on the amount of time left on the loan, with larger penalties for earlier prepayments. The exact amount of the fee will depend on the terms of the loan agreement and the lender’s policy.

The purpose of a prepayment penalty is to deter borrowers from prepaying their loans, as this can negatively impact the lender’s ability to generate revenue from interest payments. This can be especially problematic in an environment where interest rates are low, as lenders may have a difficult time replacing the lost income with new loans at a similar rate.

However, there are also some potential benefits to borrowers from prepaying their loans. 

For example, by paying off the loan early, the borrower can save on interest payments over the life of the loan, potentially reducing the total cost of borrowing. Additionally, prepaying the loan can help improve the borrower’s credit score by reducing their debt-to-income ratio.

When considering a loan with a prepayment penalty, it is important to weigh the potential benefits and drawbacks carefully. Borrowers should carefully read and understand the terms of the loan agreement, including the size and timing of the prepayment penalty, before making a decision.

In some cases, a lender may be willing to negotiate the terms of the prepayment penalty, or even remove it entirely. This may be especially true for borrowers with a strong credit history or a significant amount of equity in their property.


See how Americor can help

Check Your Options

About Americor

Americor provides debt solutions to thousands individuals and families all over the country. We’re a next-generation debt relief company with a proprietary platform designed to help clients get out of debt quickly. Together we’ll develop a strategy for you to enjoy a debt free lifestyle. Learn more about how Americor can help relieve the burdens of debt today.

18200 Von Karman Ave, 6th Floor Irvine, CA 92612
New Clients:
[email protected]
Existing clients:
[email protected]

We provide debt resolution services. Our clients who make all monthly program payments save approximately 40 – 50% of their enrolled debt (average of 43%) upon successful program completion, before program fees. Fees are based on a percentage of your enrolled debt at the time of starting the program and range from 15%-25% of your enrolled debt. Programs range from 20-48 months. Clients must save at least 25% of each debt due to an enrolled creditor before a bona fide settlement offer will be made. On average, clients receive their first settlement within 4-7 months of enrollment and approximately every 3-6 months thereafter from when the prior debt was settled. Not all Clients complete the program. Estimates are based on prior results and may not match your results. We cannot guarantee that your debts will be resolved for a specific amount or percentage or within a specific timeframe. We do not assume your debts, make monthly payments to creditors or provide tax, bankruptcy, accounting, legal advice or credit repair services. Our program is not available in all states; fees may vary by state. Some programs may be offered through The Law Firm of Higbee & Associates d/b/a Advantage Law. The use of debt resolution services will likely adversely affect your credit. You may be subject to collections or lawsuits by creditors or collectors. Your outstanding debt may increase from the accrual of fees and interest. Any amount of debt forgiven by your creditors may be subject to income tax. Clients may withdraw from the program at any time without penalty and receive all funds from their dedicated account, other than funds earned by the company or fees paid to third-party service providers, as may be applicable. Read and understand all program materials prior to enrolling. Certain types of debts are not eligible for enrollment. Some creditors are not eligible for enrollment because they do not negotiate with debt relief companies. To determine the offers you may be eligible for, Americor conducts a “soft credit pull.” This credit pull does not impact your credit score, creditworthiness, or ability to obtain credit from other sources. The soft pull is not a tradeline entry, it does not report against your score and will only take a few minutes.

Americor Funding, LLC (18200 Von Karman Ave, 6th Floor Irvine, CA 92612) is fully accredited by the Better Business Bureau (BBB), the American Fair Credit Council (AFCC), and the International Association of Professional Debt Arbitrators (IAPDA). CA Department of Financial Protection and Innovation (DFPI) License # 603K913.

Copyright © 2022 Americor Funding, LLC dba Americor Financial. All rights reserved