prepayment

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Related to Pre-Payment: Prepayment penalty

Prepayment

1. The payment of a debt in full before it is due. Prepayment is good for the borrower because it relieves him/her of the debt, but it deprives the lender of interest he/she would have received otherwise. As a result, some lenders attach prepayment penalties to loans to disincentivize prepayments. Prepayment can me a major risk to collateralized mortgage obligations as coupon payments are based on interest received from the underlying mortgages. Less commonly, this is called anticipation. See also: Prepayment risk.

2. Payment in advance for a good or service not yet received.

prepayment

A payment made before the day it is due. For example, sending a check on the transaction date for securities bought with regular-way delivery will almost surely result in prepayment.

prepayment

or

payment in advance

an expense which is paid in one trading period but which is properly chargeable against the revenues or profits of future trading periods. For example, if a company preparing accounts for the year to 31 December pays its annual rent on 1 April, then only three quarters of that rent relates to the current trading period, the remaining quarter being a prepayment for use of the building from 1 January to 31 March in the next trading period. Prepayments are counted as part of the company's assets at the end of the trading period and are usually included as part of DEBTORS in the firm's BALANCE SHEET. See ACCRUAL.

Prepayment

A payment made by the borrower over and above the scheduled mortgage payment.

If the additional payment pays off the entire balance it is a “prepayment in full”; otherwise, it is a “partial prepayment.” See Partial Prepayments.

References in periodicals archive ?
This necessitated a partnership with Interswitch to promote a secure and enabling environment for people to make pre-payments for products purchased on Kaymu, said Sefik Bagdadioglu.
The notification comes as some banks are charging pre-payment penalty of up to 2 percent of the outstanding loans.
To help keep these bills down, SSE is continuing to protect pre-payment meter customers from the higher fixed costs associated with the technology by applying the same PS100 per fuel standing charge that applies to other customers.
At present, no pre-payment penalty is charged on floating rate loans.
The consumer organisation called on suppliers to make pre-payment energy more affordable and convenient.
Some suppliers are believed to have charged pre-payment customers pounds 100 a year extra and pounds 80 a year more for customers who pay by cash or cheque instead of direct debit.
If HMRC notices that a landlord who normally collects pre-payments from certain tenants extends that practice to others, the landlord can expect a visit from the taxman.
But if the companies refuse, legislation to force them to axe the pre-payment scam will be in place by next winter.
Pre-payment meters have been branded a rip-off after watchdog Of gem said it cost companies just pounds 88 annually to service them, but many customers were charged far more.
NORTH MPs have backed calls to end the exorbitant fuel charges placed on those who use pre-payment meters.
5 percent interest -- under a Voluntary Pre-payment Plan (VPP) proposed by the companies.