Defining step up schedule for payments
You can customize the borrower payment schedule where the payment amount can be stepped up or down by a fixed amount or percentage. The step up schedules are added in the lending product. While creating the contract, you can retain the default schedules, modify them or create new ones. You can also delete the default schedules in case no step up option is to be specified. A negative value indicates reduction of the payment amount by the specified value.
For example, a borrower wants to increase the repayment amount by 5% each year on a 5 year loan. The lender can specify the start date, step up factor of 5% and frequency of Annual to create the step up schedule. The system reverse calculates the starting EMI such that the loan can be completed in 5 years and each year the EMI amount can increase by 5%.
Flexible repayment plan, if specified for the contract, takes precedence over the step up schedule. If the step up schedule is finally implemented, it does not accumulate the step ups that had overlapped with the repayment plan and hence got skipped. In the above example, if a flexible repayment plan existed for the first two years, the step up schedule implemented in the third year would increment the payment only by 5% and not 5+5+5 = 15%.
Prerequisites
The following is the prerequisite to defining a step up schedule:
- At least one step up schedule is defined at the product level.
Steps
Perform the following steps to create a step up schedule:
In the contract that you are creating, scroll to the
Delete the default step up schedule if required, by clicking the Delete icon next to the schedule. You can also modify the schedule by clicking the Edit icon.
For specifying a new schedule, click Add.
Specify the schedule Sequence.
Specify the Start Date from when the step up must be effective.
Specify the StepUp Factor.
This is the amount or percentage of loan amount by which the payment must be stepped up. A negative value causes a step down.
Select the Frequency at which the payment must be stepped up. This can be Monthly, Quarterly, or Annually.
Repeat steps 3 to 7 to create more schedules.
Click Validate to verify your entries.
Field reference
| Field Name | Description |
|---|---|
| Sequence | The sequence number for the step up schedule. The schedules are applied in the order of the sequence. This field is mandatory. Else, an error is displayed while saving the contract. |
| Start Date | The date from which the step up is effective. |
| StepUp Factor | The amount or percentage by which the payment must be stepped up. Negative value causes step down. |
| Frequency | The frequency at which the payment must be stepped up. |