Payments

When a borrower pays any amount of money against a bill or a charge, it is recorded as a loan payment transaction (LPT). Any regular payment whose amount is at least (payoff amount - payoff tolerance), is considered to be a loan payoff.

Overview

When a borrower pays any amount of money against a bill or a charge, it is recorded as a loan payment transaction (LPT). If a regular payment amount is at least = (payoff amount - payoff tolerance) then the loan is considered paid off.

Transactions 

In CL Loan, transactions are created or updated within the Transactions tab.

• The Funding sub tab displays transactions for all disbursals made for the loan.
• The Payments sub tab is used to record the regular payments on the loan and any loan payoff payments, received from the borrower.
• The Others sub tab is provided to record any other transactions or activity on the loan contract. For example, if the loan is restructured, a transaction is created defining the terms of the restructure. The Activity section in loan contract displays any such change to the loan. For example, changed due day, or interest rate. The  Contract Details section of the loan contract displays the original values of these loan attributes.

The subsequent sections of this chapter describe each of these transactions. 

Payment Types

Payments may be done manually or electronically. The two types of payments in CL Loan are:

• Manual
• Automated payment

Manual Payments

 You can make manual payments using any of the following modes of payment:

• Cash
• Check
• Excess
• Wire 

Electronic Payments

Electronic payments are referred to as ACH payments. Lenders can receive a one-time electronic payment on a contract that is set up for manual payments. Or, they may schedule recurring electronic payments. Accordingly, CL Loan enables lenders to create a one time ACH or set up a recurring ACH transaction for a loan contract. If you collect post dated cheques from borrowers, you can leverage the Recurring ACH functionality to map the bills to the cheque presentment on each due date. For information on setting up ACH payments for a loan contract, refer to Setting up ACH Payments in the CL Loan Administration Guide.

Payment Spread

You can use the default payment spread set up for the org, which defines the balance types, such as fees, interest, and principal, and the order in which these must be satisfied from the payment amount received from a borrower. Or, you can override this at the lending product or contract level with a custom spread. In addition, you can manually distribute the payment amount across different balance types by selecting the Manual Spread option while creating the loan payment transaction. Or, you can let the system automatically apply the amounts, whereby, the balance types are satisfied in the order of the spread.

For more information on payment spread, refer to section Payment Spread under section Key Concepts of a CL Contract.

For information on defining a payment spread, refer to section Setting Up Payment Spreads in the CL Loan Administration Guide.

ACH Lock Period

Cash transactions are cleared immediately by the system. ACH transactions and cheque based transactions require a time frame to get cleared by the respective bank. CL Loan offers lenders the choice to either auto clear such payments or set up an ACH lock period before these get auto cleared or rejected, during which the system waits for the bank to process these transactions and clear or reject them.

Payment Application Modes 

The payment application modes are of three types:

• Future Dues
• Current Dues
• Deposit

These modes provide lenders the flexibility to decide how any excess payment made by the borrower is applied towards the outstanding dues. In all cases, the borrower's outstanding principal amount is reduced by the excess amount.

Future Dues

Any amount remaining from [Paid amount - (bill amount - fee component)] is saved as Reserve Amount for Next Due. This amount is used to satisfy the future bills till it is fully consumed. In such a case, the borrower does not have to make a payment against the future bill to the extent that is satisfied by the excess amount. The default Payment Application Mode is Future Dues.

Current Dues

Any amount beyond the current bill amount is deducted from the outstanding principal amount. However, the borrower’s payment plan remains unchanged. Therefore, in the system, this amount is not added to the Reserve Amount for the Next Due of a CL Contract. 

Once a loan payment transaction is cleared, the Account Balances section of the CL contract's Details page displays the updated principal, interest and fee amounts.  

Deposit

Any excess amount paid in addition to the due amount is saved as Deposit.

On this excess amount, the borrowers earn interest at a rate set by the lender. Borrowers get the benefit of paying less interest to the lender than they would pay in the absence of these accounts because the interest charged on the loan gets reduced by the interest earned on the amount in their virtual deposits.

Interest posted on the contract takes into account the interest posted by the deposit too, and hence, its value is the difference between the interest posted for the loan and the interest posted for the deposit.Interest Posted = Interest Posted on Loan - Interest Posted on Deposit.

Example

Let us assume that on January 5, 2016, for a loan contract:

 The Payment Spread is defined as: 

• Fees: 25
• Interest : 50
• Principal: 200

Extra amount Received= 500-250-25 = 500-275 = 225 (Paid amount – bill amount - fee component). 

For Current Dues:

• Reserve Amount for Future Payment = 0
• Payment to be paid by the borrower on February 10 = 250 + 25 (if fee is again applicable)
• The outstanding principal is reduced by 425 (500-50-25) to the new amount of 4575 (5000 - 425).

For Future Dues:

• Amount to be paid by the borrower on January 10 = 250, is satisfied with this amount.
• Reserve Amount for Future Payment = 225 to be used in the next bill. 
• Payment to be paid by the borrower for the next bill on February 10 = 50 (250 bill amount + 25 fee amount - 225 remaining in reserve).
• Same as for current dues, the outstanding principal is reduced by 425 (500-50-25) to the new amount of 4575 (5000 - 425).

Additional Payment Scenario

If Payment  Date = Disbursal Date, then the first bill is generated at the time of disbursal.

Payment application mode provides lenders the flexibility to decide how any excess payment made by the borrower is applied towards the outstanding dues. Irrespective of the payment application mode, the borrower's outstanding principal amount is reduced by the excess amount. Amortization based loans use the Current Dues payment mode.

Current Dues - any amount beyond the current bill amount is deducted from the outstanding principal amount. However, the borrower’s payment plan remains unchanged. Therefore, in the system, this amount is not added to the Reserve Amount for the Next Due of a CL Contract.

Once a loan payment transaction is cleared, the Account Balances section of the CL contract's Details page displays the updated principal, interest and fee amounts.

For Example,

Let us assume that on January 5, 2016, for a loan contract:

The Payment Spread is defined as:

• Fees: 25

• Interest : 50

• Principal: 200

Extra amount Received= 500-250-25 = 500-275 = 225 (Paid amount – bill amount - fee component).

For Current Dues:

• Reserve Amount for Future Payment = 0

• Payment to be paid by the borrower on February 10 = 250 + 25 (if fee is again applicable)

• The outstanding principal is reduced by 425 (500-50-25) to the new amount of 4575 (5000 - 425).

Payments within pre-bill period - For contracts where Pre-bill Days are set up, if the payment transaction date is equal to or later than the (Last Due Date - Pre Bill Days) and earlier than the Last Due Date, that is, if it falls between the last bill generation date and due date, the payment goes to Excess. On the due date, an excess LPT is created for the balance amount after satisfying the dues. If the 'Excess Threshold % for Reschedule' value is defined, the excess amount is compared to this value and if found sufficient, is used to reschedule the loan. Else, the excess amount continues to be maintained as excess in the loan contract. 

For information on contract reschedule triggered due to excess payment, refer to section Automatic rescheduling of a contract

Additional payment scenario:

• If Payment  Date = Disbursal Date, then the first bill is generated at the time of disbursal.
• In case of flexible AMZ loans, 1 closed IPT and 1 open IPT is created at the time of disbursal. The due amount and the due date in Closed IPT is same as in the1st schedule.