Originally Posted by
Cutriss
This is not completely accurate. In some states, it is against the law to have borrowing schemes with early payment penalties, but not all. A friend of mine bought a car several years ago and only found out after the fact that the interest-over-term was fixed and that if she paid extra, it would only be credited toward her next payment and not toward the principal.
It depends not only on your state laws but also the type of debt. Most (if not all) conventional mortgages should not have this issue, but smaller arrangements (such as personal loans, auto loands, HELOCs, etc) may have this stipulation.
Caveat emptor.