In many cases the borrower pays back the loan before the maturity period starts which can result in a big loss for the lender. In order to make up for the interest money they lose the lenders charges a penalty which can be based on either the interest that was charged by the lender for a specific number of months or the percentage of the loan that is remaining. This particular amount is called the payment penalty. Following are tips that can help you in reducing your payment penalty.
If you want your prepayment penalty reduced then the simplest way is to draft an iron clad contract which clearly states all the different regulations, rules and also the series of actions that will take place in case of various scenarios. This contract can provide you with legal footing if the loaner asks you to pay more penalty than what was stated in the contract. Long unending conversations with the loan officer of the bank will not help you in reducing the payment penalty. In order to do that, you have to involve the manager of the branch and explain to him why reducing your payment penalty would be the best option.
In dealings like this the key is to keep your cool because if you are aggressive or demanding then this can prevent people from reducing your penalty. So if you want your penalty to be reduced then you have to approach this matter with a calm and composed mind. In these type financial transactions, it is vital that you get everything documented because if you are unable to control these types of scenarios then a binding document can prove to be very useful for you.