Payment tolerance

Payment Tolerance is the permissible amount of tolerance provided by a financial institution to clear the bills. Borrowers may request for specific periods of payment tolerance in their contracts. This can be done more than once in the life of the contract, and is enabled by setting up the tolerance start and end dates. Interest is accrued on the principal remaining, irrespective of the payment tolerance. 

For example, 

If the payment tolerance rate = 20%,  and due amount = 2036.16.

If you make a payment of 1628.93 (80% of 2036.16), the bill is considered satisfied. 

You can define the payment tolerance as a rate or a fixed amount. In addition, you can define it as the minimum or maximum of these two values by selecting the Payment Tolerance Type as Min or Max. 

For example,

Tolerance = MIN (10% or 50). If bill amount = 400, tolerance is 40 (minimum of 40 and 50). 

If bill amount = 600, tolerance becomes minimum of (60 and 50) = 50.

Payment tolerance is defined at the org level, and can be modified at the product or contract level. For information on payment tolerance at the org or product level, refer to section Setting Up Payment Tolerance in the CL Loan Administration Guide.

Payment tolerance can be applied for one payment only. Such a bill is marked as 'Satisfied With Tolerance', while keeping the contract in active status. The outstanding bill amount must be settled in the next payment to avoid delinquency. 

For example,

Bill Amount = 100, and payment tolerance = 30%,

If the borrower pays 80 towards Bill 1, it is marked "Satisfied with tolerance".

However, when Bill 2 is presented, if the borrower again pays 80, then 20 goes towards satisfying Bill 1, and it gets marked as Payment Satisfied.  However, payment towards Bill 2 is only for 60 which is below the tolerance amount (70) and the bill gets marked as unpaid and contract becomes delinquent.

If Interest of Arrears (IOA) is set up, then interest is accrued as usual on the principal remaining, while IOA is accrued on the delinquent or unpaid amount. 

Prerequisites

The following are the prerequisites to change the payment tolerance rate:

• Default Tolerance Rate is set at the org level and or defined at the product level.
• Payment Tolerance Type is selected at the product level to define it as a minimum or maximum of the rate and amount values.

Steps

Perform the following steps to define or change the payment tolerance:

1. Login to your Salesforce account.
2. Click CL Contracts.
3. Select the required CL Contract ID.
4. Click Payment Tolerance Change.
   1. Specify the Payment Tolerance Start Date and Payment Tolerance End Date.
   2. If Payment Tolerance Type of Min or Max is selected in the product, specify the required Payment Tolerance Rate and the Payment Tolerance Fixed Amount. Else, specify one of these values. 
5. Click Save.

Field Reference