Accelerated Loan Payment

[Guest BarryK]

Can the principal on a loan from a qualified retirement plan be paid off early in one lump sum or does payment have to adhere to the amortization schedule?

[WDIK]

The loan repayment schedule must provide for a level amortiziation. However, I am not aware of any general prohibition against an early payoff.

My own question: Would a loan policy be able to ban early payoffs?

[g8r]

I agree that there isn't anything prohibiting an early payoff. In fact, when plans impose a restriction that there only be 1 loan outstanding then the plan requires the repayment of an existing loan (in a lump-sum) before a new loan can be made.

I also think a loan prgram could prohibit the early payment of a loan. It would also need to be in the loan note and would certainly be rather onerous to the participants.

[Guest BarryK]

Thank you both for your advice. I thought that a level amortization schedule should have no special bearing on lump sum payoffs, but I needed confirmation.