Impact of Due Day on the Due Dates in the Amortization Schedules

Overview

Amortization schedules can change for a variety of reasons. The manner in which the Due Date of a loan contract's schedules changes is determined by a number of factors. In this section, we'll look at how the due dates in the amortization schedules change due to the presence of Due Day in various scenarios. For example, the Due Date may be different for different schedules when Due Day is not the same as Payment Start Date or when a Due Date falls on a holiday.

Understanding the following functional aspects will help ensure accurate Due Date updates for loan contracts in the Q2 Loan Servicing application.

Scenarios depicting how the Due Dates change due to the Due Day:

• When you create a new contract, the system automatically considers the contract's Due Day when generating Amortization Schedules.

• Unless otherwise specified, the system sets the value of the New Due Day to the contract's Due Day upon rescheduling.

• Regular repayment schedules consider the New Due Day when rescheduling to generate amortization schedules.

• If you change the Repayment Start Date while rescheduling, make sure to also change the New Due Day field so that all EMIs are created on the New Due Day of the month. Otherwise, the system would generate schedules with due dates that correspond to the Due Day specified in the contract.

• While rescheduling, in the Flexible Repayment Plan, the first schedule adheres to the Due Date of the Payment Start Date, while the subsequent schedules follow the New Due Day. For example, say we have the Payment Start Date for Flexible Repayment Plan as February 28 for 5 terms and New Due Day as 30. Then the system considers the first Due Date as February 28, followed by March 30, April 30, and so on.

Additional scenarios:

• For loan payment frequencies like Daily, Weekly, Bi-weekly, Semi-Monthly, and Semi-Monthly-PD, the system follows the existing behavior for Due Date adjustments.

• When using the old API, rescheduleALoan, it is recommended to switch to the new API that supports LoanRescheduleParameters.

  Following is the old API: rescheduleALoan(loanId, transactionDate, repaymentStartDate, interestRate, interestOnlyPeriod, frequencyOfPayment, noOfInstallments). This API does not take Due Day as a parameter.

  Instead, you must use the new API that takes LoanRescheduleParameters as a parameter, and provide Due Day as a value for dueDay in LoanRescheduleParameters.

• When Move Across Months is set to true and the Schedule Adjustment Method is set to After, and if you need the first EMI to be scheduled at the beginning of the month, while remaining EMIs to be scheduled at the end of the month, then in the Flexible Repayment Plan, you must use one term for the first schedule and add another row starting at the end of the month. The reverse applies when the Schedule Adjustment Method is set to Before.

Examples

Let us understand the behavior of the Due Dates in the schedules with the help of a few examples.

Example 1: Repayment schedules when loan is rescheduled by adding a Flexible Repayment Plan that has different dates with contract's Due Day = 25

1. Create a lending product with the following values:

   • Interest Rate = 10%

   • Terms = 12

   • TCM = Month and Days

   • Is Interest Posting Enabled = true

   • Interest Posting Frequency = Monthly

   • Payment Frequency = Monthly

   • Move Across Months = False

   • Schedule Adjustment Method = After

2. Add Business Hours with Saturday and Sunday as holidays.

3. Move SOD to June 2, 2015.

4. Create a Simple Loan contract with the preceding lending product with the following values:

   • Due Day = 25

   • Loan Amount = $10,000

   • Payment Start Date = 7/2/2015

5. Approve and disburse the contract.

6. Verify the Amortization Schedule. It is as follows:

   

7. Go to Loan Quick Menu > Loan Actions > Reschedule and add the following Flexible Repayment Plan:

   

8. Click Add.

9. Verify the Amortization Schedule. After rescheduling, the Amortization Schedule is as follows:

   

From the preceding image, we observe the following:

• After the rescheduling, the earlier amortization schedule is archived and a new one is created.

• The system generates the following schedule for the first row of the flexible payment plan:

  • Due Date	Due Amount
    7/2/2015	$1,000
    8/25/2015	$1,000
    9/25/2015	$1,000

  • The Due Date for the first schedule gets set to the Payment Start Date of the first row of the Flexible Payment Plan, and then the schedules thereafter take their Due Dates from the Due Day of the contract which is 25.
• The system generates the following schedule for the second row of the flexible payment plan:

  • Due Date	Due Amount
    10/12/2015	$34
    11/25/2015	$87.03

  • The Due Date of the first schedule of the second payment plan gets set to Payment Start Date of the second row of the Flexible Payment Plan, and then the schedule thereafter take their Due Dates from the Due Day of the contract which is 25.
• The system generates the following schedule for the third row of the flexible payment plan:

  • Due Date	Due Amount
    12/31/2015	$700
    1/25/2016	$700

  • The Due Date of the first schedule of the third payment plan gets set to Payment Start Date of the third row of the Flexible Payment Plan, and then the schedule thereafter take their Due Dates from the Due Day of the contract which is 25.

• The last schedule of the Amortization schedule in the preceding image is generated for Due Date as 6/27/2016 instead of 6/25/2016. This is because 6/25/2016 is a Saturday that is a holiday, and as the Schedule Adjustment Method = After, the due date gets shifted to 6/27/2016.

Example 2: Repayment schedules where Due Day = 31 and the Due Dates fall on a holiday and Move Across Months = True

1. Create a lending product with the following values:

   • Interest Rate = 10%

   • Terms = 12

   • TCM = Month and Days

   • Is Interest Posting Enabled = true

   • Interest Posting Frequency = Monthly

   • Payment Frequency = Monthly

   • Move Across Months = True

   • Schedule Adjustment Method = After

2. Add Business Hours with Saturday and Sunday as holidays.

3. Move SOD to June 2, 2015.

4. Create a Simple Loan contract with the preceding lending product with the following values:

   • Due Day = 31

   • Loan Amount = $10,000

   • Payment Start Date = 7/2/2015

5. Approve and disburse the contract.

6. Verify the Amortization Schedule. It is as follows:

   

7. As seen in the preceding image:

   • First schedule Due Date honors the Payment Start Date that is 7/2/2015.

   • The remaining schedules must follow the due day of 31 on loan contract. However, as Move Across Months = true and Schedule Adjustment Method = After, if the Due Date falls on a holiday, then it must shift to the next working day. Thus, because the schedule Due Date of 1/31/2016 falls on a Sunday, it gets shifted to next month date 2/1/2016 as highlighted in the preceding image.

Example 3: Repayment schedules with Flexible Repayment Plan and where Due Day = 31, the Due Date falls on a holiday, and Move Across Months = false

1. Create a lending product with the following values:

   • Interest Rate = 10%

   • Terms = 12

   • TCM = Month and Days

   • Is Interest Posting Enabled = true

   • Interest Posting Frequency = Monthly

   • Payment Frequency = Monthly

   • Move Across Months = false

   • Schedule Adjustment Method = After

2. Add Business Hours with Saturday and Sunday as holidays.

3. Move SOD to 1/31/2015.

4. Create a Simple Loan contract with the preceding lending product with the following values:

   • Due Day = 31

   • Loan Amount = $10,000

   • Payment Start Date = 2/28/2015

5. Go to Loan Quick Menu > Loan Actions > Reschedule and add the following Flexible Repayment Plan:

   

6. Approve and disburse the contract.

   Verify the Amortization Schedule. It is as follows:

   

   As seen in the preceding image:

   • The first schedule Due Date is 2/27/2015, as February 28 is a holiday (Saturday) according to the business hours attached and as the Move Across Months = false and Schedule Adjustment Method = After, if a Due Date on the month end falls on a holiday, then it must shift to the previous working day.

   • The first three schedules have $1,000 as the Due Amount and the fourth schedule has $1,000 as the Due Principal as per the Flexible Repayment Plan attached.

   • The fourth schedule Due Date is 5/29/2015. This is because 5/31/2015 is a Sunday and as the Move Across Months = false and Schedule Adjustment Method = After, the Due Date gets shifted to 5/29/2015 as it cannot move across the next month.