In a competitive lending market, as the case today, banks are looking for an edge to win quality loans. For quality credits, many community lenders are eliminating loan origination fees and prepayment provisions to differentiate from the competition. Since it is easy for an institution to reduce fees and prepayment provisions, that competitive advantage quickly becomes commonplace, and no lender retains an advantage. In this article, we take a quantitative look at the benefits of loan prepayment provisions.
Four Reasons for Prepayment Provisions