Definition of Accelerated Payments

What does the term accelerated payments mean? What is meant by accelerated payments?

Accelerated payments occur when a person makes additional or larger payments on a payment plan.

The advantage of making accelerated payments is that you are paying down the principal at a faster rate, which will likely result in less interest being paid over the course of the loan.

Banks and lenders will have various rules for making accelerated payments. Some banks, for instance, will let you pay down 20% of your mortgage every year without penalty. Other loans (let’s say a car loan) will allow you to pay out the outstanding principal at any time without interest.

An accelerated payment could be made at random intervals (such as when you receive your income tax refund) or on a predetermined plan (for instance, making an extra payment every month).

The main purpose of accelerated payments? To reduce the amount of interest that you pay and to pay the loan off as quick as possible.

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