Prepayments Prepayment Premium Clause Samples

The "Prepayments; Prepayment Premium" clause defines the terms under which a borrower may repay a loan before its scheduled maturity and specifies any additional fees or premiums that must be paid in connection with such early repayment. Typically, this clause outlines whether prepayments are permitted, if notice must be given, and the calculation method for any prepayment premium, which is often a percentage of the prepaid amount or a set fee. Its core function is to compensate the lender for the potential loss of anticipated interest income and to discourage borrowers from refinancing or repaying the loan early without financial consequence.