11. Paying off a consumer loan prior to its maturity Paying off Installment Loans Some installment loans include terms that charge a penalty if the borrower pays off the loan earlier than its maturity date. The specific terms can vary so it's important to know if a loan you're considering provides for a prepayment penalty and it does, what its exact terms are. A common way to compute a penalty is the sum-of-the-digits method You and your friend recently took out installment loans You expect to pay off your loan before its matunty date, so you made sure that the contract: Provides for the use of the Rule of 785 Does not contain a prepayment penalty clause Provides for the use of the sum-of-the-digits method Your Trena didn't anticipate being able to pay of the loan before its matunity date until he won a lot of money in the lottery, enough to pay It OT He decided to pay off the loan today rather than invest his winnings. What's the most sely reason why? Your friend didn't anticipate being able to pay off the loan before its maturity date-until he won a lot of money in the lottery, enough to pay it off. He decided to pay off the loan today rather than invest his winnings. What's the most likely reason why? The interest rate on the loan is lower than the rate of return your friend would earn on his investment The loan contract would use the sum of the digits method to compute interest if your mend paid off the loan before its maturity date. The contract does not contain a prepayment penalty clause True or False. The terms Rule of 70s and sum-of-the-digits method are used interchangeably, True Pa