Additional Interest on Custom

Overview

Lenders can charge additional interest on the interest-bearing principal types listed in the additional interest component. However, in the future, a lender may want to charge an additional interest on an interest-bearing principal that is not listed.

For example, a lender may want to charge an additional interest on the Principal Remaining or on the Loan Amount. To accomodate all the possible options, an Interest Bearing Principal type called Custom is introduced in the Oxygen release. When you select Custom as an Interest Bearing Principal, you can charge an additional interest as per your custom logic for the additional interest calculation defined in a custom class. 

You can define a custom class in Custom Settings > Custom Hooks. When you do this, your custom class extends the AbstractCustomInterestCompInterestCalc class to customize the additional interest calculation.

Define a Custom Class

To be able to charge an additional interest on a custom amount, you need to first define a custom class.

Prerequisites

None

Steps

To define a custom class:

1. Log in to your Salesforce account.

2. Go to (Setup) > Setup.

3. In the Quick Find box, search for Custom Settings and then click it.

4. Scroll down and click Custom Hooks.

5. Click Manage.

6. Click New.

7. In the Custom Interest Comp Calculator Class field, specify the custom class name, and then click Save.

   Note:

   The custom class name that you provide in this field must be a global class.For example, if you have a custom class named CustomInterestComponentInterestCalc1, then you can specify it as highlighted in the following image:

   Custom Class

   This enables the product to consider this custom class for the calculation of the custom interest component.

Example: Charge Additional Interest on Custom

Let us look at an example to understand how an additional interest on a custom interest bearing principal works.

Define Custom Class

Let us say we have defined the following class in Custom Settings that calculates the additional interest on Loan Balance: CustomInterestComponentInterestCalc1.

For the Borrower (Loan Contract)

Let us understand how custom interest bearing principal works on the loan contract.

Create a Simple Loan Lending Product

Let us say a Simple Loan Lending Product is created with the following details:

Create a Contract

Let us create a contract with the following terms and conditions:

On the Next Due Date

On the Next Due Date, June 18, 2015:

• A bill gets generated with the Due Amount = $2092.81.

• Two IPTs are created as follows:

  • Regular IPT with Interest Posted = Principal * Interest Rate of the loan contract * (Month and Days) = $20,000 * (10/100) * (30/360) = $166.67.

  • Additional Interest IPT with Interest Posted = Loan Balance * Interest Rate of the additional interest component * (one month as per Time Counting Method) =  $20,000 * (5/100) * (30/360) = $83.33.

    Note:

    The calculation of the additional interest is based on the custom logic defined in the custom class.

For the Investor (Investment Order)

Let us understand how custom interest bearing principal works on the investment order.

Create a Simple Loan Lending Product

Let us say a Simple Loan Lending Product is created with the following details:

Create a Contract

Let us create a contract with the following terms and conditions:

Create an Investment Order

Let us create an investment order with the following terms and conditions:

On the Next Due Date

On the Next Due Date, October 19, 2015:

1. Run IO Interest Accrual Job and IO Interest Posting Job.

2. Following IPTs are created in the system:

   • Investment Order IPT with Interest Posted = Principal Amount * Interest Rate of the Investment Order * one month as per Time Counting Method = 10,000 * (10/100) * (30/360) = $83.33.

   • Additional interest IPT with Interest Posted = Investment Amount * Interest Rate of the Additional Interest Component of the Investment Order * one month as per Time Counting Method = 10,000 * (5/100) * (30/360) = $41.67.

     Note:

     The calculation of the additional interest is based on the custom logic defined in the custom class.