What is meant by prepayment rebates?

Question

i am working on loans and the terms associated with them. now what does a prepayment rebate mean? is it part of the penalty? how is it useful? what are its defects?

Answer 1

It sounds like a small deduction for agreeing to pay the loan instalments earlier than required, or, it could be the exact opposite, an additional charge for early repayment.

Not a term I have ever heard before.

Answer 2

prepayment rebate. not totally sure but logically it would be -

usually you have an insurance associated with the loan.  the amount of the insurance is added to the capital upfront.  if you pay the loan off early you get refunded the portion of the insrance premium you will no longer habve to use because you wont have a loan.

this therefore either reduces the total figure to pay off, or you get it back as a rebate.  as it was effectively prepaid it would class as a "prepayment rebate".