Posted by Randy-Indy on September 28, 2004 at 19:08:38:
Thanks for your response. The Loan was sold to a bank that also has our car loan. I have received offers to consolidate all unsecured debt and secured debt into one great big loan lowering total monthly payments to debt. It seems to me the bank is in a greater risk position while I would be in a diminished position to negotiate (all debts with one creditor,a big alligator) if the unforeseen happens i.e. my cash flow is reduced. Although there is the thinking among some attorneys that non-performing loans come under regulatory scrutiny (banks can’t loan 8X the amount in default) banks actually benefit from a bankruptcy of the borrower(i.e. no incentive to really work with me because bankruptcy freed up 8X the amount in default + tax write-off) rather than dragging out non-performing loan and settling for a percent owed.
Posted by Randy-Indy on August 24, 2004 at 12:43:29:
I suppose there are two questions involved in a matter:
Is a pre-payment penalty (any pre-payment penalty, reasonable or exorbitant) enforceable in the State of Indiana by the lender? This would be chapter and verse of the of the law and Administrative Code giving enforcement teeth to the law.
What are the rules of practice (i.e. what is generally done and when is it not done) regardless of what the law reads in Indiana? Example: We know the due on sale clause is there and under most circumstances not exercised by the lender, etc.
Re: “Indiana legal question”? - Posted by Randy-Indy
Posted by Randy-Indy on August 31, 2004 at 13:17:17:
OK. This is not a legal question and I wave any and all rights concerning anyone “sharing their thoughts” on whether or not lenders generally enforce the pre-payment penalty in Indiana or any other state. I would certainly not take any thoughtful discussion as legal advice. Randy
The bank I work for commonly enforces a 5,4,3,2,1 pre-payment penalty – at least on commercial and agricultural loans, which is the area I work in at the bank. This means in the first year a 5% pre-payment penalty applies, in the second year a 4% penalty, and so forth. You indicated your pre-payment penalty is 6% for 3 years, so this does not seem overly excessive; however, I am a banker, not an attorney. Separately, you did not specify what is happening with the loan amount… is it being refinanced with the same bank in a different loan? If so, our bank typically waives the prepayament penalty. Yet, if it’s going to another lender, then we charge.