## Overview

Eight Bank allows borrowers to prepay their loans in part or in full without penalty. This policy is part of our commitment to providing borrower-friendly, transparent financial services. This document outlines the rules, procedures, and best practices for handling loan prepayments and communicating clearly with borrowers.

## Key Policy Highlights

- No Prepayment Penalties: Borrowers may pay off their loan early at any time without additional fees.
- Prepayments May Be Partial or Full: Any amount above the scheduled payment may be applied toward principal.
- Borrower Direction Required: Prepayments must be clearly designated by the borrower to apply directly to principal.

## Prepayment Rules & Conditions

1. Notice Requirements

- Full Payoff: Encourage borrowers to request a formal payoff quote (valid for 10 calendar days).
- Large Prepayments: No formal notice required, but recommend borrower confirm application method (principal vs. future payments).

1. Payment Application

- If no instruction is provided:
  - Default is to apply excess to next scheduled payments, not to principal.
- If borrower specifies “apply to principal”, process as a principal-only payment and confirm via system notes.

1. Interest Accrual Timing

- Interest continues to accrue daily until the loan is paid in full.
- Final payoff amounts should account for accrued interest through the anticipated payoff date.

1. Loan Recasting (If Applicable)

- We do not automatically recast loans after prepayment.
- For eligible loans (e.g., certain mortgages), loan recasting must be formally requested and approved.

1. Minimum/Maximum Prepayment Amounts

- No minimum required for extra payments.
- No maximum annual prepayment limits apply (unlike some institutional or regulated products).

1. Source of Funds

- Prepayments must come from:
- The borrower’s verified account
- Approved third parties (only with written authorization)
- Use of borrowed funds (e.g., cash advance, new loan) is discouraged and may trigger regulatory review if flagged.

1. Payoff Procedures

- Confirm that:
  1. All interest through the payoff date is included
  2. Any fees (e.g., late charges) are settled
- Once a loan is fully paid:
  1. Close account in loan servicing system
  2. Release any collateral/lien (e.g., auto title, mortgage release) within regulatory timelines

1. Linked Services

- Advise borrower that prepayment may impact:
  1. Auto-debit discounts
  2. Insurance coverages linked to loan term
  3. Credit reporting: Account will be updated to "Paid in Full"

## Staff Procedures

When a Borrower Inquires About Prepayment:

1. Review the loan account to check balance, interest rate, and current payment status.
2. Confirm the type of prepayment: partial vs. full.
3. Inform the borrower:
   - There is no prepayment penalty.
   - They can make a payment anytime online, by phone, or by mail.
   - To specify if the payment should apply to principal.

When Processing a Prepayment:

- Use transaction code for principal-only payment if applicable.
- Add clear servicing notes:
  - Date, amount, and borrower instruction
  - Method of payment received
- For full payoff:
  - Generate and verify payoff statement
  - Process lien release if secured
  - Send borrower confirmation of account closure