Mike borrows $25,000 from Jill,and executes a promissory note stating that he will repay the money in one year.Mike also requests for a clause that allows him to repay the loan prior to the due date to which Jill agrees.In this scenario,Mike is requesting for a(n)________ clause.
A) prepayment
B) acceleration
C) extension
D) forestallment

Question

Quizplus · Accepted Answer

A prepayment clause is a provision in a loan agreement that allows the borrower to repay the loan prior to the due date. In this scenario, Mike is requesting for such a clause with Jill. A prepayment clause gives the borrower more flexibility and can save them money on interest payments. Option B) acceleration refers to a clause that allows the lender to demand full repayment of the loan if certain conditions are met, option C) extension refers to a clause that allows the parties to extend the repayment date of the loan, and option D) forestallment is not a commonly used term in finance or loans.

Mike Borrows $25,000 from Jill,and Executes a Promissory Note Stating