prepayment

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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 ?
The pre-payment gateway promotes business transactions country-wide through the Kaymu platform.
As pre-payments rise, the tranches pay off ahead of schedule and the Z-bond starts making payments earlier than originally anticipated.
Today's pre-payment, in addition to reducing our interest expense, signals Anacomp's strong financial health post-bankruptcy," noted Donald L.
PayPoint currently operates approximately 12,000 terminals in convenient locations collecting payment of household utility bills, council tax and rent, mobile phone pre-payments and television license renewals each year.
In addition, other adapter vendors required high OEM pre-payments, as well as royalty payments for every adapter that we sold embedded with our solution whereas Librados' royalty-free source code license was just a small fraction of what other adapter vendors were asking for.
Makes Pre-Payments on Term Loan A and Term Loan B Facilities in
Users who have prepaid for periodical subscriptions or monthly content plans will receive refunds for the unused portions of their pre-payments.
Stavropoulos explains that they are being absorbed by a combination of excess interest and rapid pre-payments.
These two pre-payments will leave Panamco Brazil with total debt of approximately $6 million by the end of the fourth quarter 2001 and will almost entirely eliminate Brazil's financial foreign exchange exposure.
Effective January 1, 2000, the Company will recognize revenue and related expenses from these types of agreements as the royalty pre-payments are exhausted through product sales by the licensees.

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