Glossary

Early payoff discount

A written reduction in payback for repaying an advance early.

Because an advance’s total payback is fixed, repaying early does not reduce it unless the agreement includes a discount schedule (for example, a lower effective factor if paid within 30, 60, or 90 days). Without such a clause, early payoff simply shortens the term and raises the estimated APR. Loans are different: interest accrues on the balance, so early repayment usually saves money, subject to prepayment penalties.

How it appears in a contract

A schedule such as "if paid in full within 60 days, the purchased amount is reduced to…". If it is not in the contract, it does not exist.

Worked example

On the $20,000 example, a hypothetical 90-day discount to a 1.15 factor would cut payback from $25,000 to $23,000. Ask for the schedule in writing before signing.

Illustrative figures on stated assumptions; not quotes.

What to ask

• Is there a written prepayment discount schedule?
• Does it apply to the full balance or only to a portion?
• For a loan: is there a prepayment penalty or a full-interest clause?

Related terms

Total payback · Renewal · Factor rate · all terms