Pre-paid fees
Overview
Pre-paid fees are the fees charged to the customer before or at the time of disbursement. This fee amount is reduced from the disbursal amount and is used only for the purpose of amortization. The borrower may choose to add the pre paid fee to the loan amount, or pay it separately.
Key Concepts
- Each pre-paid fee can be linked to one or more than one lending product and each lending product can be linked to one or more than one pre-paid fee.
- A pre-paid fee is included as a separate entity on the lending or LOC product and is not a part of the fee set attached to the product.
- The time of charge of the fee must be defined as Pre-Paid Fees to add it to the lending product as a pre-paid fee.
Example
The loan amount =1000 and the pre-paid fee= 200
And...
| If | Loan Amount is | Borrower Repays | Disbursed Amount is |
|---|---|---|---|
| Fee is added to loan amount | 1200 | 1200 | 1000 |
| Fee is not added to loan amount | 1000 | 1000 | 800 |