DEFINITION of 'Prepayment'

The satisfaction of a debt or installment payment before its official due date. A prepayment can be for the entire balance or for any upcoming payment that is paid in advance of the date for which the borrower is contractually obligated to pay it. Examples of a prepayment come in the form of rent or early loan repayments.

BREAKING DOWN 'Prepayment'

There are many types of debts and obligations that can be settled in advance through prepayment. Consumers can use prepayments on tax forms to settle future tax obligations, they may prepay credit card charges before they receive a statement and sometimes many prepay loans through refinancing. It's always a good idea to make sure that prepayment is allowed without penalty for mortgages, or, if there is a penalty that it's only for a few years.

  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Prepaid Insurance

    Payments that are made in advance for insurance services or coverage. ...
  3. Mobile Payment

    Money rendered for a product or service through a portable electronic ...
  4. Prepayment Risk

    The risk associated with the early unscheduled return of principal ...
  5. Public Securities Association Standard ...

    An assumed monthly rate of prepayment that is annualized to the ...
  6. Pass-Through Security

    A pool of fixed-income securities backed by a package of assets. ...
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  1. Can personal loans be included in bankruptcy?

    Personal loans from friends, family and employers fall under common categories of debt that can be discharged in the case ... Read Full Answer >>
  2. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  3. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  4. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  5. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  6. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>

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