Accelerated payment occurs when a borrower speeds up the repayment of a loan. This can be done by:
- Shortening the amortization period, which increases the amount of each regular payment
- Making payments more frequently—for example, weekly or bi-weekly instead of once a month
- Making extra lump-sum payments at scheduled intervals
Accelerated payments reduce the borrower’s interest costs (the total fee paid to the lender for the loan). This can benefit a business but depends on a reliable cash flow. Before committing to an accelerated payment schedule, it is good practice for companies to ask if they can switch back to a slower repayment schedule should their cash flow change.