In Massachusetts is it legal to pay off a loan without penalty?

Massachusetts
Evilish13 asked:

I live in Massachusetts, i recently took out a personal loan with a contract. It includes an interest rate. If i pay it off early with i still have to pay the entire amount or will i not be obligated to pay all the interest? example: I buy a business for $90,000 with a 4% interest rate for 4 years. The total i would pay back is like $98,000. What if i pay the loan off in say 3 years?? Then would i only pay back say roughly $93,000??



Comments (2)    Posted in Law & Ethics    

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2 Responses to 'In Massachusetts is it legal to pay off a loan without penalty?'

  1. open4one - August 26th, 2009 at 6:55 am

    You have to read the loan document, but basically you only owe the Principal amount of the loan, plus interest up to the current date, plus any applicable Prepayment Penalty.

    You do not owe them interest for the entire life of the loan if you pay early under any circumstances whatsoever.

    It is POSSIBLE that the interest for the current date is for an entire month, meaning if you pay off today, you pay through Dec 31, but that would be it. You don’t owe January.

    Prepayment penalties vary, and must be specified in the loan document itself. Most are phrased something like “if you pay off more than 20% of the original Principal amount during any 12 month period, you will pay a penalty of six months interest on the amount over 20%.”

  2. sophist - August 27th, 2009 at 10:38 am

    Not if it is not specifically prohibited by the contract. If there is nothing in the contract pertaining to early payout, then you must be allowed to pay it off and corresponding interest repaid to you.


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