GPI 298 – Cross out prepayment penalties on your proposed capital loans or leases so you can pay off the loan early if you wish.

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Review all capital loans and leases and find out where the prepayment penalty language or clause is sitting in the document.  When you have identified the language for this penalty, cross it off from the loan. Initial and date your change before you sign the loan at the end of the document and then submit it to the lender.

The lender’s representative will be forced to call you and state that this penalty clause cannot come out of the loan. Tell them to submit it as you sent it to them to their legal department and you will wait for the reply.

If they remain firm, call elsewhere for funding.  Sometimes they will state it is acceptable this time to their legal department.  Remember that the loan is just a proposal.  It intimidates people leading them to believe that they must accept everything in the document.  It is only a proposal and can be changed if the other party will allow it.  If they want the business and especially if your credit is good, they will more than likely let your change stand or maybe negotiate a prepayment penalty only within the first six months or first year of a four year loan. Get other bids to see what the market is offering.

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