Prepayment penalties are enforceable.

Question

Quizplus · Accepted Answer

Prepayment penalties are legal and enforceable depending on the terms outlined in the loan agreement. The penalty is a fee charged by the lender if the borrower pays off the loan before the end of the agreed-upon term. This penalty helps protect the lender from losing out on the interest payments they would have received if the borrower had continued to make payments as scheduled. However, some states have laws that limit or prohibit prepayment penalties, so borrowers should consult their loan agreement and state laws to determine if they are subject to a prepayment penalty.

Prepayment Penalties Are Enforceable