What: A possibility to choose between the below 2 pre-payment recalculation options (available with the "Pre-Payment Allocation” = “On Upcoming Pending Installment Only”) at the moment of posting a repayment that is a pre-repayment:
a) Reduce Amount per Installment
b) Reduce Number of Installments
Why: Many organisations allow their customers to choose, when they make an early repayment, how it should affect their future payments on a loan account (especially in case a substantial early payment is made). This flexibility not only allows to gain commercial advantage over competitors, but may also result from legal requirements in a given country.