Financial Calculator Version 4.0 - FinCalc 4.0

What is the new FinCalc 4.0 ?

The FinCalc 4.0 is a new, improved version of Q2 Loan Servicing's Financial Calculator.

FinCalc 4.0 helps you achieve better performance while using the Q2 Loan Servicing. It uses a new method of calculating the scheduled payment amount that helps in improving the calculation time and efficiency by computing the scheduled payment amount in a single iteration using a single equation formula named as the Present Value (PV) formula. This calculated scheduled payment amount is then rounded up instead of rounding to the nearest to achieve a lesser payment amount in the last schedule.

You can avail of this new version by upgrading to the latest Spring'23 patch version or to the August 2023 release.

Versions before FinCalc 4.0:

What are the benefits of using FinCalc 4.0?

The new version of FinCalc provides the following benefits:

• Reduction of time for scheduled payment (EMI) calculation: The time taken for the calculation of scheduled payment (EMI) and for returning the amortization schedule is substantially reduced.

How to enable FinCalc 4.0?

For a fresh or a new install of Q2 Loan Servicing, as a new user or a lender on the Q2 Loan Servicing platform, the default version of FinCalc is 4.0 at the org level. If you are an existing user on the platform, your FinCalc version continues to remain unchanged even if you upgrade to the latest Spring'23 patch or the August 2023 release unless and until you explicitly change this either at the org level or at the product level for new contracts.

Enable the new version at the org level

You can enable the new version of Financial Calculator at the org level by specifying the number 4 in the Setup > Custom Settings > the Org Parameters (loan) as highlighted in the following image:

Whatever you specify in this field, will be the default version that will be considered if you do not specify a version at the product level.

Steps to enable FinCalc 4.0 at the org level:

1. Log in to your Salesforce application.

2. Go to Setup > Custom Settings.

3. Click the Manage for Org Parameters (loan).

4. Click Edit.

5. Enter 4 in the Financial Calculator Version field.

6. Click Save.

Enable the new version at the Lending Product level

If you want to try out the new version for running a particular set of loans for better performance, there is a provision at the loan product level to specify the version of FinCalc for only that product. For this, a new field named Financial Calculator Version has been added to the Loan Product Additional Parameters section. You can click Edit Additional Parameters in the Lending Product and specify the new version as 4 in the Financial Calculator Version field as highlighted in the following image:

If this field is specified as null, then the system, by default, considers the version that is specified in the Org Parameters.

The older versions that are supported here are 3 and 3.1.

At the contract level, the Financial Calculator version gets defaulted from the Lending Product. You cannot change the version at the contract level.

Steps to enable FinCalc 4.0 at the product level:

1. Select the required Lending Product.

2. Click Edit Additional Parameters.

3. Enter 4 in the Financial Calculator Version field.

4. Click Save.

How does the Financial Calculator Version field value at different levels determine the FinCalc version that the contract uses?

The Financial Calculator Version field exists at the org level (in the Org Parameters), product level (in the Lending Product), and the contract level (in the loan contract). The value of this field at these different levels determine whether a contract uses the new version or the old version of FinCalc.

As Financial Calculator Version is a new field added at the product and the contract level, the value of this field is initially null for the existing products and contracts. If you create a new product, you can specify a new value in this field.

If you specify 4 in this field while creating a new product and if the org level has a value of 3.1, then the new contracts created from this product will also consider the value 4 for the FinCalc version. Thus, the value at the product level takes precedence over the value at org level for a loan contract.

If you specify the new value, 4, at the org level, and if the existing product has a null value, then when an existing contract is rescheduled, it uses the version of FinCalc specified at the org level to generate the new schedule. This is because if an existing or old contract is rescheduled, and if the value of this field is null in this contract, then the system tries to look for a value of this field at the existing product level and if that is also null, then the system considers the value of this field at the org level. Now if the org level field has a value of 4, then this existing contract computes and generates schedules using the FinCalc 4. In any case, the value at the product level takes precedence over the value at org level for a loan contract.

Now, say, you want existing contracts to continue to run on 3.1 and you want only new contracts to use the new version 4. Then you can opt for one of the following ways:

• Option 1:

  1. Run a script to update the field value on the existing contracts to 3.1.

  2. Then if you change at the org level to 4.0, the system will only consider 4.0 for new contracts.

     Thus, the existing contracts remain at 3.1.

• Option 2:

  1. Create a new product and update the field on the product level to 4.0.

  2. New contracts that are created with the new field will take 4.0.

  3. Old or existing contracts will continue to take 3.1 from the org level as the existing products have a value of null.

Thus, with the help of this field at the various levels, the system supports both the following scenarios:

• All contracts, both existing and new, must use the new FinCalc 4.0.

• Only new contracts must use the new FinCalc 4.0.

What is the new formula used to calculate the scheduled payment amount using FinCalc 4.0?

The new formula to calculate the scheduled payment amounts (EMI) using FinCalc 4.0 is the PV formula.

The PV formula used for calculating the scheduled payment amount (EMI) is as follows:

where:

• EMI or scheduled payment amount = P/F
• F = (1/ (1 + R * d1/365)) + (1/ ((1 + R * d1/365) * (1 + R * d2/365))) + ((1/ ((1 + R * d1/365) * (1 + R * d2/365) * (1 + R * d3/365))) + ... to N terms
• EMI = Equal Monthly Installment amount
• P = Principal amount
• R = Rate of interest per annum
• N = Number of payments (payment terms) for the contract
• T = Terms
• d1 = Number of days from the Contract Date to the first payment date
• d2 = Number of days from the first payment date to the second payment date
• d3 = Number of days from the second payment date to the third payment date and so on...

What are the release-wise enhancements made for FinCalc 4.0 in Q2 Loan Servicing?

FinCalc 4.0 is built in a period of three releases (Summer'22, Winter'22, and Spring'23) and is now available as a complete feature in the latest Spring'23 patch and August 2023 release. You can now start using FinCalc 4.0.

The release-wise enhancements in FinCalc 4.0 made in Q2 Loan Servicing are listed as follows:

• Enhancements in the Summer’22 release

• Enhancements in the Winter’22 release

• Enhancements in the Spring’23 release

• Enhancements in the Spring’23 patch release

Enhancements in the Summer’22 release

As part of the Summer’22 release, version 4.0 of the Financial Calculator (FinCalc) supported the calculations in the following scenarios:

• A Simple Loan EMI calculation for the defined Principal, Fixed Rate, and Contract Term.

  • For payment frequencies such as Daily, Weekly, Bi-Weekly, Semi-Monthly, Monthly, Bi-Monthly, Quarterly, Semi-Annual, Annual, Semi-Monthly, and Semi-Monthly PD.

  • For all Time Counting methods such as 360/360, 365/365, Actual/Actual, and Actual/366.

• A loan contract with Holiday Setup at Business Hours (Weekly Holidays and Bank Holidays) for all Payment Frequencies and Time Counting Methods.

• A loan contract with Repayment Plan provided by the user for a few terms (Only Equal Monthly Installments Payment Type).

• A loan contract with Rate Schedules defined by the user.

• A loan reschedule on all the preceding cases of contracts.

Enhancements in the Winter’22 release

As part of the Winter'22 release, version 4.0 of the Financial Calculator (FinCalc) was updated to support the calculations in the following scenarios:

• A loan contract with Interest Only term defined.

• A loan contract with Repayment Schedules defined with other payment types, such as Equated Principal and Interest Only.

  Note:

  Principal Only repayment type is not supported.

• A loan contract with StepUp Schedules defined.

• A loan contract with Holiday Schedules defined.

• A loan contract where the Start Date is included in the interest calculations, which means that the Interest Calculation Period is selected to Include Start Date.

• A loan contract where the system considers the maturity date instead of the terms for calculating the schedules.

  For example, for a ten-months or ten-installments loan, if you require the loan only till January 25 (Maturity Date), then the system will calculate the number of terms internally and calculate schedules. Such a loan can also make use of the FinCalc version 4.0 for calculating the schedules.

• A loan contract with a Balloon Payment.

Enhancements in the Spring’23 release

As part of the Spring'23 release, version 4.0 of the Financial Calculator (FinCalc) was updated to support the calculations in the following scenarios:

• A loan contract with the capitalization of interest enabled, where the capitalization is not for an Advance Interest.

• A loan contract where Periodic Fees are included in the schedules.

• A loan contract with Advance Interest enabled in schedules where:

  • Advance Interest is enabled on the contract either with the Interest Only (IO) period or without the IO period, but the value of the Repayment Procedure is selected as Equated Principal while creating the loan contract.

  • Advance Interest is charged partially by charging it only for the first few schedules or cycles or terms, where the first few schedules or cycles or terms is IO period and the second schedule onward or the remaining terms can be Equal Monthly Installments (EMI). Here, IO terms are where the interest is charged in advance and EMI terms are where the interest is in arrears. This is called an advance-arrears mix contract. For example, in a 12-term loan, the first few terms are when the interest is charged in advance (IO + equated principal) and the remaining terms can be arrears.

• A loan contract with interest rate calculation where a payment amount is defined.

Enhancements in the Spring’23 patch release

In the Spring'23 patch release, FinCalc 4.0 has been built completely by adding the following changes in the behavior:

• The scheduled payment amount (EMI) is rounded up at each cycle rather than rounding to nearest.

  Note:

  To know more about the rounding up of the scheduled payment amounts (EMI), see the The Rounding Up of the Scheduled Payments in FinCalc 4.0

For the following scenarios, the system continues to use the version 3.1 of FinCalc, even if version 4.0 is selected in the org or the product:

• A loan contract with Accrual Type defined as Accrual Through Date.

• A loan contract with Interest Type defined as Flat.

• A loan contract with Repayment Plan that has at least one Payment Type as Principal Only provided in any order with the Repayment Procedure selected as EMI or Flexible.