Rate Cards Configuration

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Rate Cards Configuration

Q2 Origination allows you to customize your interest rate offerings for loan applications based on the financed amount, and the loan and applicant information parameters such as term, credit rating, frequency, and so on. For example, for a loan amount between $10,000 to $100,000, for 12 months, to be paid monthly, and for a customer with a credit grade of A, you may offer an interest rate of 10%. Based on a different set of values for these parameters, you may offer a different interest rate.  

Note:

  • Rate cards may differ for different products offered by the lender.

  • A single rate card can have multiple rate card details by varying elements, such as the financed amount, term, interest rate, and rate factor. This gives you the flexibility of addressing diverse borrower preferences.

  • On generating pricing, multiple pricing options, corresponding to the rate card details, are generated and you can select the pricing that is most suitable.

  • The rate card can be customized by defining additional parameters or factors to create more relevant offerings.

    For example, offer a lower rate of interest to borrowers with insurance or add the number of years of employment remaining as a factor in the evaluation of an application.

    These parameters are specific to a rate card. You can make a factor available or unavailable for use, and that applies to all rate card detail options that use it.

  • While saving the additional determining factor, you can provide benchmark values for the fields you have included in the factor definition. An application's inputs are measured against these benchmark values.

  • On a given date, only one rate card is effective for a given CL product or company.

The configuration of a rate card for a loan application involves the following three steps:

  1. Setting up the rate card 

  2. Defining the rate card setup detail

  3. Defining additional determining factors

You can create, edit and delete a rate card. 

Rate Card Setup

Prerequisites

Before you proceed to set up a loan rate card, ensure that the following prerequisites are met:

  • A company is enabled, to set up the rate card for a company.

  • A CL product is created, to set up the rate card for a product.

Steps

To set up a loan rate card:

  1. Log in to your Salesforce account.

  2. Go to  (App Launcher) > Origination Configuration > Rate Card.

    The Rate Cards page with a list of existing rate cards is displayed. You can create multiple rate cards.

  3. Select New Rate Card.

    The New Rate Card Setup page is displayed.

  4. Select Loan/ Line of Credit as the record type.

    This is the type of product for which you are creating the rate card.

  5. Select Next.

    The Rate Card Setup page is displayed.

  6. Provide the details as described in the following table, and then select Save:

    Rate Card Details

    Field Name Action and Information

    Rate Card Name

    A name for the rate card. For example, Construction Loan Rate Card.

    Product Type

    This is the product that you selected on the previous page.

    Description

    Description of the rate card that can help you identify its purpose easily. For example, Rate card for construction work-related loan for commercial buildings.

    Company

    The name of the company that is creating the rate card.

    For this, the company must be set up.

    Start Date

    Specify a date from which the rate card is effective.

    The current date is displayed as the default start date, however, you can edit it. You can define multiple rate cards with overlapping date ranges. However, only one rate card can be active at any time.

    End DateSpecify a date by which the rate card is effective.
    Enabled

    Select this checkbox if you want to use the rate card, else leave this field blank. 

    At least one rate card must be enabled in order to generate pricing for an application.

    Note:

    You cannot enable a disabled rate card later. The following message is displayed if you try to enable a disabled rate card:Error: Disabled rate card cannot be enabled.

    Filters

    Field Name Action and Information
    Filter By Loan Amount/Credit Limit

    Select the Filters to apply to the rate card. You can filter the rate cards based on the parameters you select here while presenting pricing options to a customer. For example, if you select Filter By Loan Amount here, then, the rate card is used for generating pricing options only if the applicant's desired loan amount falls in the range of the minimum and maximum loan amount (specified in the rate card detail).

    If checked, loan amount or credit limit (only in case of the line of credit application) will be considered while filtering the available pricing options else not.

    Filter By TermIf checked, the term is considered while filtering the available pricing options else not.
    Filer By Credit RatingIf checked, credit rating will be considered while filtering the available pricing options else not.
    Filter By FrequencyIf checked, the payment frequency will be considered while filtering the available pricing options else not.

    The rate card is created and the page refreshes to display the list of existing rate cards along with the rate card that you have created. Scroll down on this page to configure further details for the rate card. Refer to the following sections on this page for detailed steps for doing this.

Define Rate Card Setup Details

This section serves the purpose of defining a template for the rate card so that the various attributes of the rate cards can be stored. 

A single rate card can have multiple rate card details by varying elements, such as the financed amount, term, interest rate, and rate factor. This gives you the flexibility of addressing diverse borrower preferences.

On generating pricing, multiple pricing options, corresponding to the rate card details, are generated and you can select the pricing that is most suitable.

You can create, edit and delete a rate card.

Add Rate Adjustments

Now, Q2 Origination provides a separate configuration where the FIs can configure additional margins/rate adjustments based on the application attributes. These adjustments are additive in nature. All adjustments that become applicable on the application are added to the base rate from the rate schedule to arrive at the net interest rate. 

This feature allows FIs to offer differential pricing to their customers based on different application attributes. This is very common in consumer lending where banks want to offer variations like preferential rates based on customer segment, when customer opts for auto debits, margins based on existing relationship value etc. These margins are additive in nature and are usually added to the Index/Base Rate derived from the preconfigured rate cards.

Note:

Adjustments are introduced for Rate Schedules. It will have all the filters like rate cards.

Prerequisites

Before you proceed to define rate card setup details, ensure that the following prerequisites are met:

Steps

To define rate card setup details:

  1. Hover over Rate Card Setup Details that appears below the list of existing rate cards and then select New Rate Card Setup Detail. Alternatively, scroll down and select the New Rate Card Setup Detail button.

    The Rate Card Detail Setup page is displayed.

  2. Provide the details as described in the following table, and then select Save:

    Information

    Field Name Action and Information
    Rate Card NameThis field indicates the rate card name specified in the previous section.
    Product TypeThis field indicates the product you selected on the previous page.
    EnabledThis field indicates  if the rate card is active. 
    Adjustment

    This field indicates if rate adjustment is allowed for this rate card.

    On selecting this checkbox, the "Adjustments" section is displayed.

    Criteria

    Field Name Action and Information
    Min Financed Amount

    Specify the minimum requested loan amount to which this rate card applies. 

    Max Financed AmountSpecify the maximum requested loan amount to which this rate card applies. 
    TermSpecify the number of months for which the loan is extended.
    Payment Frequency

    Specify the repayment frequency.

    The supported options are:

    • Monthly
    • Quarterly
    • Annually
    Credit RatingSelect the credit rating of the borrower.
    Days Convention

    Select the method that is to be used for the calculation of interest.

    The supported options are:

    • 30/360
    • 365/365
    • Actual/Actual
    • 366/365
    Min TermSpecify the minimum term to which this rate card applies.
    Max TermSpecify the maximum term to which the rate card applies.
    Use Additional Determining Factors

    Select this checkbox if you want to customize the rate card based on the additional parameters.

    Adjustments

    Field Name Action and Information
    Adjustment DescriptionSpecify the nature of rate adjustment. For example, Auto Debit Margin.
    Adjustment %This is actual margin/rate adjustment that needs to be applied.
    Adjustment TermThe user must specify the term/units( 3/years) for which the rate adjustment will be applied. The rate adjustment must always be applied from the start of the loan. (A rate adjustment of -0.5% will be applied for the 1st 3 years of the loan term). If the term/units is blank, then the rate adjustment is applicable for the entire loan term.
    Adjustment Units

    Additional Determining Factors

    Note:

    If an additional determining factor is associated with the rate card setup details, then these fields are populated with the configured value)

    Field Name Action and Information
    Determining Factor NameName of the additional determining factor.
    Evaluation OperatorThe operator applied on the values in the factor, for example, >, <, >=.
    RequiredIndicates whether the factor is used in the rate card detail.
    Type
    Value
    Applicable for ApplicationIndicates whether this factor will be used while price applications

    Financials

    Field Name Action and Information
    Pricing Method

    Select the method used to price a loan application. 

    The supported options are:

    • Rate Factor
    • Interest Rate
    • Rate Schedule
    • Adjustment
    Note:

    Rate Factor is not applicable for loan applications.

    Rate Factor

    If you select Rate Factor as the Pricing Method, specify the rate factor. 

    For example, specify 0.08 for a rate factor of 8%.

    Interest Rate (%)

    If you select Interest Rate as the Pricing Method, specify the interest rate. 

    For example, specify 8 for an interest rate of 8%.

    Rate Schedule Setup

    Rate schedule means schedule of interest rate applicable from time to time on an application.

    If you select Rate Schedule as the Pricing Method, perform the following:

    1. Select Add.
    2. Specify all the fields such as, Rate Type as Fixed or Floating, Index, Margin Rate, Interest Rate, Terms, Unit.
    3. Select Validate.

The Rate Card Setup Details are refreshed to display the saved details.

As a business user, you can configure rate card details and associate them with an index. Further, you can associate multiple indices against a single rate card detail.

Associate Rate Card to a CL Product

  1. On the Rate Cards page, in the Product Rate Card Association section, select New Product Rate Card Association.

  2. Select the CL Product and the Rate Card Setup name that you want to associate and then select Save.

    This rate gets defaulted to all the applications associated with the CL product,but can be modified at the application level.