Payments to Deposits
Overview
With the Mercury release, when a borrower makes a payment against a loan contract, the whole payment can be first credited to the virtual deposit account. All the payments made toward the loan are then applied by sweeping the amount from the virtual deposit to the loan account. This is to ensure that the borrower always sees one flow of money movement - first to Deposit, and then from there to the loan to the extent of the bill that is due.
Key Concepts
Upon making a payment, instead of satisfying the loan balances first and then moving any excess amount to the deposit, the payment can be directly moved to the deposit by enabling the Apply Payments on Deposit flag while creating the loan product or while creating the contract. This flag is disabled by default.
Once the complete payment has been allocated to the deposit account, a separate batch job runs in the SOD, which moves the balances from the deposits to satisfy the bill payments.
The Apply Payments on Deposit flag regulates whether normal payment transactions should be applied to the loan in the order of spread, or they should go to the Deposit.
If this flag is enabled on the product or the contract, and if you want to change this option at the time of payment, you can enable the Override Deposit Payment flag during initiating the Loan Payment Transaction. This assists in the movement of payment toward the normal spread that is Fees, Interest, and Principal, instead of the deposit.
The LAD and the Last Transaction Type on the loan account do not change on a payment that is not applied to the loan.
Deposit payments are of the type Regular. The payments of the following types cannot be made to a Deposit:
Principal Adjustment - Sub
Fee and Interest Waiver
Excess
Write-off Recovery
Settled
Sold
Refinance
Deposit Payment
You can reverse a deposit transaction by going to the Payment Transaction Reversal in the Loan Payment Transaction screen. See Reverse a Payment to Deposit.
Deposit transactions in a sequence of non-LAD-changing events can be reversed in any order as there is no LAD change involved. For example, say there are the following deposit transactions:
Deposit Transaction Override Deposit Payment Does the LAD Change? A False. No. B True. Yes. The payment goes to the normal loan payment spread. C False. No. D False. No. E False. No. In the preceding example, you can reverse the deposit transactions C, D, and E, in any order as they are a sequence of non-LAD-changing events, and there is no LAD-changing event between them. However, you cannot reverse deposit transactions A, B, C, D, and E in any order because there is a LAD-changing deposit transaction B existing between them.
You can make a backdated payment transaction before any number of deposit transactions if they do not change the LAD.
Once the first bill is generated, a deposit must have a minimum amount.
By default, CL Loan provides the following minimum amount criterion:Deposit minimum amount = Current Payment Amount + Unpaid Bill amounts.
However, there is also a provision to customize the calculation of minimum amount with the help of the Custom Hooks object provided with the Mercury release of CL Loan.
If the deposit does not have this minimum amount while withdrawing or transferring from it, the system displays an error message.
Apply the Payment to Deposit
Prerequisites
- A deposit account is created.
Steps
Step 1: Enable the Apply Payments on Deposit flag.
Step 2: Add a Deposit Detail.
Step 1: Enable the Apply Payments on Deposit flag:
You can enable the Apply Payments on Deposit flag in the following scenarios:
- While creating a lending product.
- While creating a contract.
- After creating a lending product or a contract.
While Creating a Lending Product
- While creating a lending product, select Payment Application Mode as Deposit.
- In the Loan Parameters field, search for the applicable LOAN PARAMETERS NO. and select it as highlighted in the following images:
If the Loan Parameters do not exist, click + New Loan Parameters as illustrated in the following image:
In the New Loan Parameters window that opens up, select the Apply Payments on Deposit checkbox to let the payments go to the virtual deposit first as highlighted in the following image, and then click Save:
To enable the flag while creating a contract, select the Apply Payments On Deposit check box in the Additional Parameters section as highlighted in the following image:
After Creating a Lending Product or a Contract
If the Apply Payments On Deposit flag is not enabled while creating a lending product, it can also be enabled after creating a lending product or a contract. To enable this flag after the lending product or the contract is created, perform the following steps:
- Log in to your Salesforce account.
- Click the App Launcher
. - Search for
CL Loan, and then click it. - Click the CL Contracts tab, and then from the list of contracts, select the required CL contract ID.
- On the CL Contract page, click Edit Additional Parameters.
- In the Edit Additional Parameters section, select the Apply Payments On Deposit checkbox as illustrated in the following image:
Step 2: Add a Deposit Detail.
On the Contract page, scroll down to the Deposit Details section, click Add to add a new Deposit Detail as illustrated in the following image:
Specify the details as explained in the following table, and then click Save:
Field Name Action and Information Sequence This is the sequence of the deposit as it is added to the loan contract. Deposit Amount This is the amount that you want to add to the virtual deposit.
Note:The deposit account can start with a zero amount too.
Deposit Rate The rate at which the borrower earns the interest on the deposit amount. Priority This is an optional field and is used to prioritize multiple deposit accounts. Note:An OLT for the addition of Deposit Detail does not get created while creating the contract.
Override the Payments to Deposit
If you have selected the Apply Payments On Deposit check box while creating the contract, you have the option to override it while making a payment. This enables the payment to satisfy the normal payment spread: Fees, Interest, and Principal.
Perform the following steps while making a payment to override the payments to deposit:
On the Record a payment window, select Override Payments To Deposit checbox as illustrated in the following image:
Note:If the Override Payments To Deposit flag is not checked and if the Apply Payments on Deposit is checked, then the payment goes to Deposit first.
If the Apply Payments on Deposit check box is not selected, then the Override Payments to Deposit check box is redundant and nonfunctional. This means that if the contract is not enabled for payments to go to deposits first, then the payments go to the normal spread, and then it does not matter if the Override Payments to Deposit check box is selected or not.
Reverse a Payment to Deposit
You can reverse a payment made to the deposit.
Prerequisites
- A payment is made to the deposit account.
Steps
Let us say a payment of $500 is made to the deposit account.
Now, perform the following steps to reverse this payment:
- Log in to your Salesforce account.
- Click the App Launcher.
- Search for
CL Loan, and then click it. - Click the CL Contracts tab, and then from the list of contracts, select the required CL contract ID.
- Click Transactions.
- Click Payments.
- Click the required LOAN PAYMENT TRANSACTION ID of the Loan Payment Transaction that was created for a deposit payment of $500 as illustrated in the following image:
In the Related tab, click New in the Repayment Transaction Reversal section as illustrated in the following image:
Specify the fields as explained in the following table, and then click Save:
Field Name Action and Information Reason Code
The following are the reason codes you can select.
Reason Code Information NSF(non sufficient funds) Select this code if the payment transaction amount is lesser than the available balance in the borrower's account.
Human error Select this code if there is a data entry error.
Other Select this code to indicate any other reason.
Date This is the date on which the reversal is to be done. Reference Any description or reference information to be stored with the transaction. For example, third reversal by the borrower. Refund to Borrower This selection indicates that a refund of the reversed amount is to be made to the borrower. This marks the LPT as reversed as depicted in the following image:
Example
Contract Details
Let us say we have a contract with the following parameters:
| Field Name | Value |
|---|---|
| Loan Amount | $50,000 |
| Interest Rate | 10% |
| Apply Payments On Deposit | True |
| Current System Date | 4/3/2013 |
| Disbursed Amount | $10,000 |
| Current Deposit Amount | $1,000 |
Deposit
A Deposit is created as illustrated in the following image:
Bill Generated
Let us say after a month, on 5/3/2013, a bill is generated as illustrated in the following image with Due Amount = $879.16.
Deposit Interest Posted
Deposit Interest Posted is calculated as follows:
Deposit Interest Posted = $1,000 * (10/100) * (30/360) = $8.33
This is as seen in the following image:
Effective Interest Posted on the Contract
The effective Interest Posted on loan contract is calculated as follows:
Interest Posted = (Interest Posted for loan contract) - (Deposit Interest Posted) = (10000 * (10/100) * 30/360)) - 8.33 = 83.33 - 8.33 = 75.
You can see this in the following image:
Scenarios
Now, let us look at the following scenarios sequentially:
Scenario 1: Override Payments to Deposit = False
Making a Payment
Now, let us say a payment of $500 is made with Override Payments to Deposit = False, as follows:
The Override Payments to Deposit check box is not selected.
Here, as seen in the preceding image, Transaction Amount = $500.
Since the Override Payments to Deposit check box is not selected, this amount must go to the virtual deposit account.
Deposit Details
You can see that this amount is moved to the deposit as highlighted in the following image:
New Current Deposit Amount = Old Current Deposit Amount + Transaction Amount = 1,000 + 5,00 =1,500.
As is depicted, the transaction date in the deposit is the same as the transaction date on which the LPT was created.
Scenario 2: Override Payments To Deposit = True
Making a Payment
Now, let us make a payment of $1000, and enable the Override Payments To Deposit flag as highlighted in the following image:
This enables the payment to be made as per the loan payment spread, and not to the deposit because the Override Deposit to Payment flag was enabled while making the payment.
This satisfies the bill amount of $879.16.
The excess payment of $($1,000 - $879.16) goes to the deposit account.
Total Amount Paid = $879.16
The excess amount that goes toward the deposit = $1,000 - $879.16 = $4,120.84.
Deposit Details
Hence the total Current Deposit Amount now is $1,500 + $120.84 = $1,620.84 as highlighted in the following image:
Scenario 3: Validating a minimum amount in the deposit by withdrawing from Deposit by doing a Deposit Adjustment
Deposit Adjustment
Now, let us try to withdraw $1,000 from the deposit by doing a deposit adjustment.
The following error message is displayed:
This is because when we are trying to withdraw $1,000 from $1,620.84, the remaining amount would be $620.84, which is less than the bill amount of $879.16.
Scenario 4: Validating a minimum amount in the deposit by transferring from Deposit 1 to Deposit 2
Adding a Deposit
Now, let us say we add another Deposit account with priority NULL and deposit amount = 1,000, by clicking Deposit Adjustment as highlighted:
Now after a month, on 6/3/2013, a new bill is generated with bill amount = $879.16.
Deposit Transfer
Now let us try to withdraw from Deposit 1 an amount such that the remaining amount in the deposit is less than the total unpaid bill amount.
Total unpaid bill amount = $879.16.
So let us try to withdraw $1,000 from Deposit 1 as highlighted by doing a Deposit Transfer from Deposit 1 to Deposit 2:
On clicking Save, the deposit does not get transferred and remains as highlighted in the following image:
This is because when we are trying to withdraw $1,000 from $1,620.84, the remaining amount would be $620.84 which is less than the bill amount of $879.16.