FinancingQuestion 80 of 120
A loan clause that charges the borrower a fee for paying off the loan early is a:
a.Acceleration clause
b.Alienation clause
c.Subordination clause
d.Prepayment penalty
Explanation
A prepayment penalty compensates the lender for interest lost when a borrower pays off a loan ahead of schedule. California law limits prepayment penalties on many owner-occupied residential loans. Borrowers should confirm whether their loan permits penalty-free prepayment.
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