How are prepayments applied to installments due under a note for an Aunt Millies Bakeries franchise?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
| NAME ANY | MIDDLE NAME BREAD | |
|---|---|---|
| CITY | STATE | POSTAL CODE |
4. BORROWER'S RIGHT TO PREPAY
Borrower may prepay the full amount or any part of this Note without prepayment penalty but together with any accrued but unpaid interest thereon. Each prepayment shall be applied against installments due hereunder in the inverse order of their maturity. In the event of a partial prepayment of this Note in an amount equal to or greater than Twenty Five Percent (25%) of the outstanding principal amount hereof on the date of prepayment, the monthly payment amount set forth in Section 3 hereof shall be reset by the Note Holder and accepted by the Borrower in writing.
5. LOAN CHARGES
If, under any law with applicability to this Note which sets maximum loan charges, the interest or other loan charges collected or to be collected in connection with this Note exceed the permitted limits, then: (i) any such loan charge shall be reduced by the amount necessary to reduce the charge to the permitted limit; and (ii) any sums already collected from Borrower which exceeded permitted limits will be refunded to Borrower. The Note Holder may choose to make this refund by reducing the principal Borrower owes under this Note or by making a direct payment to Borrower.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, a borrower has the right to prepay the full amount or any part of a note without incurring a prepayment penalty, in addition to any accrued but unpaid interest. Each prepayment will be applied against the installments due in the inverse order of their maturity. This means that any extra payments made will be used to pay off the last installments first, working backward towards the earlier payments.
If a partial prepayment of the note equals or exceeds 25% of the outstanding principal amount on the date of prepayment, the note holder will reset the monthly payment amount, subject to written acceptance by the borrower. This adjustment could potentially lower the monthly payments due after the significant prepayment.
If any applicable law sets maximum loan charges and the interest or other loan charges collected exceed these limits, the excess charge will be reduced to the permitted limit. Any sums already collected that exceeded these limits will be refunded to the borrower. The note holder can choose to refund this amount by either reducing the principal the borrower owes or by making a direct payment. If the refund reduces the principal, it will be treated as a partial prepayment, further affecting the installment schedule as described above.