What is required to be paid to the date of prepayment for Big O Tires?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
Maker shall have the right to prepay the unpaid principal balance of this Note in whole or in part at any time or from time to time, without premium or penalty, provided that all accrued and unpaid interest on the unpaid principal balance of this Note, at the variable interest rate as set forth herein, is also paid to the date of such prepayment.
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
According to Big O Tires' 2025 Franchise Disclosure Document, a franchisee has the right to prepay the unpaid principal balance of a note, either in full or partially, at any time without incurring any premium or penalty. However, this is contingent upon the franchisee also paying all accrued and unpaid interest on the outstanding principal balance. The interest is calculated at the variable interest rate specified in the note up to the date of prepayment.
In simpler terms, while Big O Tires allows franchisees to pay off their loan early without extra charges or penalties, they must also pay any interest that has accumulated on the loan up to the date they make the prepayment. This ensures that Big O Tires receives all the interest it is entitled to up to the point of prepayment.
This is a fairly standard practice in financing agreements. The provision protects the lender (Big O Tires) from losing out on interest income they would have earned had the loan been held for its full term, while still providing the borrower (the franchisee) the flexibility to manage their debt and potentially save on future interest payments if they have the means to prepay.