Promotions: Discount Rates
What are Promotions in CL Loan?
Promotions, in CL Loan, are the discount rates offered for a specific period of time.
It is a configuration added in the Oxygen release that can be enabled and then included in the loan contracts. When a promotion is included in a loan, it overrides the existing rates for a specific period of time.
Why is it introduced in CL Loan?
There are times when a lender comes up with seasonal discount offers for a product, and the borrower gets some temporary discount on the interest rate. To support such business scenarios, the operation users would need the CL Loan system to have the capability of setting up such offers on the product for a specific period. The loan contracts booked on such products would accrue daily interest on those discount rates for that period.
With the Oxygen release of CL Loan, you can now set up a Promotion for your loan contract.
How do you set up a Promotion for a Loan Contract?
To set up a Promotion for a loan contract in CL Loan:
- Enable the Promotions feature in Custom Settings.
- Configure a Promotion in Servicing Configuration.
- Include the promotion while creating the lending product.
- Create a contract with the preceding lending product and add Promotions.
1. Enable the Promotions feature in Custom Settings
To be able to use the Promotions feature in CL Loan, you will have to enable it in the Custom Settings > Enable Loan Features.
For more information on enabling Promotions, see the Enable Loan Features section in the CL Loan Administration Guide.
2. Configure a Promotion in Servicing Configuration
For a product to include a promotion, it needs to have the Promotion configured first in the Servicing Configuration of CL Loan. You can configure multiple Promotions in CL Loan. Each configured promotion overrides the existing rates of the loan for the specified period.
Once a promotion is configured, it can then be added while creating a lending product. The promotion is then applied to the loan contract corresponding to this lending product.
For more information on including a promotion in a lending product, see Include the Promotion While Creating the Lending Product.
Prerequisites
Before configuring Promotions in CL Loan, ensure that the following prerequisite is met:
- The Promotions flag in Custom Settings > Enable Loan Features is enabled as explained in the preceding step.
Steps
To configure Promotions:
- Log in to your Salesforce account.
- Click
(App Launcher). - Click Servicing Configuration.
In the Product > Product Management... section, click Promotion.
Servicing Configuration
Click Define New Promotions Rate.
Define a New Promotion Rate
Provide the details as described in the following table, and then click Save:
As an example, you can refer to the New Promotions image.
Field Name Action Promotion Name Specify a name of the promotion that you want to configure in the org. Discount Rate Specify the rate that you want to charge for this promotion. This rate overrides the existing rate for the time period specified in the following date fields. Amount Ignore this field as it is redundant and not used anywhere in the CL Loan product. Sequence Ignore this field as it is redundant and not used anywhere in the CL Loan product.
Note:The Sequence displayed in the Promotions schedule is a different field and does not take its value from this field.
Start Date Specify the date from which the discount rate must be applicable. End Date Specify the date till which the discount rate must be applicable. Description Specify a description for the configured Promotion. New Promotions
This saves the Promotion and is applicable from the Start Date to the End Date specified in the product, and thus the contract, that it is included in.
3. Include the Promotion While Creating the Lending Product
Prerequisites
Before creating a lending product with a Promotion included in it, ensure that the following prerequisite is met:
- The Promotions flag in Custom Settings > Enable Loan Features is enabled as explained in the preceding step 1.
- Promotions is configured in Servicing Configuration as explained in the preceding step 2.
Steps
To include a Promotion in a lending product:
While creating a lending product, provide the following necessary details:
As an example, you can refer to the Lending Product image.
Field Name Action Promotions Select the Promotion Name configured in the Servicing Configuration in the preceding step. Interest Type Select Floating.
This ensures that the interest rate in a loan can change. If it is Fixed, the interest rate would not change over the life of the loan
Floating Rate Revision Frequency Select the floating rate revision frequency Lending Product
Complete creating the lending product as explained in the Create a Simple Lending Product section of the CL Loan User Guide for Simple Loans.
4. Create a Contract with the preceding Lending Product
A promotion can be applied to a contract. When it is applied to a contract, the discount rates provided as part of the promotion affect the rates given on the contract from the promotion start date to the end date. Multiple Promotions can be associated with a contract.
While creating a contract, add a Promotion as illustrated in the following image:
Promotions Schedule
You can add more than one Promotions.
How does the inclusion of promotion affect the Rate Schedule?
When a loan has a promotion defined in it, the Rate Schedule is a combination of the flexible Interest Rate Schedule and the Promotion Schedule, and the discount rates are applied to the interest rates.
To understand this better, see Example: The Effective Rate Schedule.
How to use the API to generate Rate Schedule with Promotion?
With the Oxygen release, a global API named generateRateSchedule is introduced in CL Common that accepts the flexible Interest Rate Schedule and the Promotion object list to provide the final Rate Schedule.
For more information on this API, see the generateRateSchedule section of the RateScheduleGenerator Class section of the Global Methods guide.
How to change the Promotion schedule after the Contract is created?
You can change the schedule of the Promotion after the contract is created.
To change the promotion schedule:
- Log in to your Salesforce account.
- Click (App Launcher).
- In the Search apps and items... box, search for
CL Loanand then click it. Go to Loan Quick Menu > Loan Actions > Promotion Change.
Loan Quick Menu
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In the Promotion Change window, perform the actions as specified in the following table:
To.. Click Change the details of a promotion 
(Edit)Delete a promotion from the Promotion Schedule 
(Remove)Add a new promotion to the Promotion Schedule Add Clear the complete Promotion Schedule Clear Reset the Promotion Schedule to the original schedule Reset Promotion Change
- Click Save.
More on Promotions
Like rate schedules, promotions are also applied on the contract while calculating the current interest rate.
The applicable rate schedule is determined by the rate and the promotion schedules defined.
The contract inherits the promotion defined in the product, and you can modify it while creating the contract.
For the defined promotions, both the start date and end date are included in the time period in which the discount rate is applied.
You can apply multiple promotions to a contract.
If two promotions fall on the same date, then the discount rate works cumulatively.
Note:For more information on cumulative discount rate calculations, see Example: Cumulative Discount Rate Calculations.
Example: Cumulative Discount Rate Calculations
Let us say we have the following Promotion Rate Schedule:
| Sequence | Name | Discount Rate | Start Date | End Date |
|---|---|---|---|---|
| 1 | Promotion 1 | 10% | January 1 | January 30 |
| 2 | Promotion 2 | 15% | January 15 | February 5 |
| 3 | Promotion 3 | 25% | January 25 | January 28 |
Then the resultant applicable discount rate is:
| Start Date | End Date | Cumulative Discount Rate Applicable |
|---|---|---|
| January 1 | January 14 | 10% |
| January 15 | January 24 | 10% + 15% = 25% |
| January 25 | January 28 | 10% + 15% + 25% = 50% |
| January 29 | January 30 | 15% +10% = 25% |
| January 31 | February 5 | 15% |
Example: The Effective Rate Schedule
Let us understand how the interest rate in the effective Rate Schedule is calculated with the help of an example.
Let's say the floating rate schedule on the contract is as follows:
| Sequence | Floating Rate Index | Index Rate | Margin Rate | Start Date |
|---|---|---|---|---|
| 1 | Floating Rate 1 | 5 | 18 | January 1, 2017 |
| 2 | Floating Rate 2 | 7 | 20 | June 25, 2017 |
| 3 | Floating Rate 3 | 5 | 8 | July 25, 2017 |
And the promotion schedule on the contract is:
| Sequence | Promotion | Start Date | End Date | Discount Rate |
|---|---|---|---|---|
| 1 | Promotion 1 | January 3, 2017 | January 10, 2017 | |
| 2 | Promotion 2 | June 28, 2017 | June 30, 2017 | 10% |
| 3 | Promotion 3 | August 10, 2017 | August 25, 2017 | 5% |
Then the resultant Rate Schedule is:
| Sequence | Start Date | Floating Rate Index | Promotion Applied | Index Rate | Margin Rate | Discount Rate | Interest Rate |
|---|---|---|---|---|---|---|---|
| 1 | January 1, 2017 | Floating Rate 1 | NA | 5% | 18% | NA | 23% |
| 2 | January 11, 2017 | Floating Rate 1 | Promotion 2 | 5% | 18% | 10% | 13% |
| 3 | June 25, 2017 | Floating Rate 2 | NA | 7% | 20% | NA | 27% |
| 4 | June 28, 2017 | Floating Rate 2 | Promotion 2 | 7% | 20% | 10% | 17% |
| 5 | July 1, 2017 | Floating Rate 2 | NA | 7% | 20% | NA | 27% |
| 6 | July 25, 2017 | Floating Rate 3 | NA | 5% | 8% | NA | 13% |
| 7 | August 10, 2017 | Floating Rate 3 | Promotion 3 | 5% | 8% | 5% | 8% |
| 8 | August 26, 2017 | Floating Rate 3 | NA | 5% | 8% | NA | 13% |
Example: A Contract with Promotions
Let us understand how a contract's rate schedules are affected when promotions are added to it with the help of an example.
Create a Floating Rate Index
Let's first create a Floating Rate Index in the Servicing Configuration with the following details:
FRI1 in Servicing Configuration
Configure Promotions in Serviving Configuration
Let's then configure Promotions in the Servicing Configuration with the following details:
Promotions
Create a Lending Product
Let's say we create a Lending Product with the following details:
| Field Name | Value |
|---|---|
| Loan Product Name | Promotions Product 2 |
| Promotions | P1 |
| Interest Type | Floating |
| Floating Rate Index | FRI1 |
| Margin Rate | 0% |
Create a Contract and add an Interest Rate Schedule and a Promotion Schedule
While creating a Contract from the preceding product, let's add an Interest Rate Schedule and a Promotions schedule to it:
Contract Field Name | Value |
|---|---|
| Product | Promotions Product 2 |
| Application Date | 2/1/2016 |
Interest Rate Schedule
Promotions Schedule
The Created Contract
Once the contract is created, values in the contract are updated as follows:
Contract Details as on 2/1/2016
We observe that:
| Contract Field | Remark |
|---|---|
| Index Rate = 12% | As per the Floating Rate Index in the Interest Rate Schedule defined and the FRI1 for the Start Date = 2/1/2016 |
| Margin Rate = 10% | As per the Floating Rate Index in the Interest Rate Schedule defined and the FRI1 for the Start Date = 2/1/2016 |
| Interest Rate = 17% | As per the calculation: Interest Rate = Index Rate + Margin Rate - Discount Rate = 12% + 10% - 5% = 17%. Discount Rate takes its value from the Promotions Schedule for the Start Date = 2/1/2016. |
The Effective Interest Rate Schedule
The effective interest rate schedule is generated with values as displayed:
Effective Interest Rate Schedule
From the above images, we observe the following:
| Start Date | Floating Rate Index Applicable | Index Rate Applicable | Margin Rate Applicable | Promotion Applied | Discount Rate Applicable | Effective Interest Rate |
|---|---|---|---|---|---|---|
| 2/1/2016 | FRI1 | 12% | 10% | P1 | 5% | 12% + 10% - 5% = 17% |
| 3/1/2016 | FRI1 | 12% | 10% | NA | NA | 12% + 10% = 22% |
| 8/1/2016 | FRI1 | 12% | 10% | P2 | 4% | 12% + 10% - 4% = 18% |
| 8/31/2016 | FRI1 | 12% | 10% | NA | NA | 12% + 10% = 22% |
| 9/1/2016 | FR1 | 11% | 8% | P3 | 6% | 11% + 8% - 6% = 13% |
| 10/1/2016 | FRI | 11% | 8% | NA | NA | 11% + 8% = 19% |
We observe that:
- The Start Dates follow the schedule defined in the Interest Rate Schedule and Promotions schedule created while creating the contract. It changes as per the change in the start dates of either the Interest Rate Schedule or Promotions schedule. For example, when the Start Date is 8/1/2016 in the preceding table, the Index Rate Applicable is 12% as per the Interest Rate Schedule defined for Start Date 1/2/2016.