Fee Accrual for Prepaid Fees
CL Loans provides the option of accruing a prepaid fee. So, the income for fees that is collected upfront can be realized throughout the life of the loan.
The frequency of the accrual can be either Daily or Month End.
Supported fee accrual methods
Straight line method
The Straight line method calculation is a simple division of the total prepaid fee to be accrued by the total number of terms to be spread over.
Example:
| Fee to be Accrued | Accrual Terms | Fee Accrued per Term |
|---|---|---|
| 100 | 20 | 100/20=5 |
IRR method
In IRR method the fee accrued over the terms is not equal and depends on the interest for the period, and the interest accrued per term.
Example:
| Terms | Total Fee Accrued | Interest for the Period | Interest Accrued | Fee Accrued per Term |
|---|---|---|---|---|
| Term 1 | 100 | 150 | 80 |
(80/150)*100 |
| Term 2 | 70 | (70/150)*100 |
Configuring fee accrual
To accrue a fee, you must associate it with a product and specify the method to accrue it.
These settings can be overridden at the contract level.
At the contract level you can specify additional parameters, such as Accrual Terms- the number of terms for which the fee should be accrued. This option works only with Straight Line method of accrual.
User interface reference
Steps to configure a fee accrual
Log in to your Salesforce account.
Click Lending Products.
Go to View/Edit Lending Products.
In the Product Pre-Paid Fees section, click New Product Pre-Paid fee.
On the New Product Pre-Paid fee page, fill in the details as described in the table below, and then click Save.
| Field | Description |
|---|---|
| Fee | The fee that you want to associate with this lending product. |
| Lending Product | The lending product with which you want to associate this fee. |
| Add Fee to Loan Amount | With this checkbox selected, this fee is included in the loan amount. |
| Enabled | With this checkbox selected, this fee is active is copied to the new contracts associated with this lending product. |
| Frequency | The accrual frequency. It can be daily or monthly. |
| Accrual Required | With this checkbox selected, this fee is accrued. |
| Accrual Method | The accrual method. |
Viewing the fee accrual stream
Use the View Stream button to view the detailed schedule of the fee accrued for a contract.
Example:
An Example of Fee Accrual Stream: