Prepayment

The issuing of payment for a bill or debt before the official due date.

More Details

A prepayment is a payment made on a loan or other debt before it is due. Prepayments are often made to pay off the debt more quickly or to reduce the total amount of interest that will be paid on the loan.

Example

Imagine that you have a mortgage with a balance of $200,000 and a fixed interest rate of 4%. You might decide to make a prepayment on your mortgage in order to pay off the loan more quickly or to reduce the total amount of interest that you will pay over the life of the loan. You could make a prepayment by making an extra payment on your mortgage each month or by making a one-time payment in addition to your regular mortgage payment.

Prepayments can be a good way to save money on your debt, as they can help to reduce the amount of interest that you pay and allow you to pay off your loan more quickly.

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