Additional Interest on Delinquent Amount For the Investor
Overview
You can charge an additional interest as a default interest on the delinquent amount for an investor. The investor earns this additional interest based on his share in the investment.
For more information on adding an additional interest component, see Add an Additional Interest Componentsection in theAdditional Interestsection of this guide.
For more information on charging an additional interest on delinquent amount, see Additional Interest on Delinquent Amount section.
Key Concepts
Additional Interest is calculated based on the share of the investor in the investment order.
Additional Interest accrued in an Investment Order is calculated as follows:
Additional Interest Accrued = Share % * Unpaid Due Amount * (Number of days for which the loan is delinquent as per Time Counting Method) * Additional Interest Rate defined for the investment order
Example: Charge Additional Interest on Delinquent Amount
Let us look at an example to understand how an additional interest on delinquent amount for the investor works.
Create a Simple Loan Lending Product
Let us say a Simple Loan Lending Product is created with the following details:
| Lending Product Detail | |
| Is Interest Posting Transaction Enabled | True |
| Interest Posting Frequency | Monthly |
| Enable Interest Posting for IO | True |
| Interest Component | |
| Interest Bearing Principal | Delinquent Amount |
| Interest Rate | 5% |
| Interest Posting Frequency | Billing Frequency |
| Time Counting Method | Month and Days |
Create a Contract
Let us create a contract with the following terms and conditions:
| Contract Details | |
| Loan Amount | $20,000 |
| Contract Date | September 19, 2015 |
| Interest Rate | 10% |
| Next Due Date | October 19, 2015 |
| Delinquency Grace Day | 1 |
Add an Investment Order for the Investor
Let us add an Investment Order with the following details:
| Investment Order | |
| Share | 50% |
| Investment Amount | $10,000 |
| Certificate Rate | 10% |
| IO Commitment Amount | $16,000 |
| IO Commitment Percent | 80% |
| Interest Component | |
| Interest Rate | 5% |
| Interest Bearing Principal | Delinquent Amount |
| Time Counting Method | Month and Days |
On the Next Due Date
On the Next Due Date, October 19, 2015:
Run the IO Interest Accrual Job and IO Interest Posted Job.
Two IPTs are created as follows:
Interest Posted for IO = 10,000 * (10/100) * (30/360) = $83.33.
Interest Posted for Interest Component = 0 as the loan is not yet delinquent.
On the First Day after the Due Date
On the First Day after the Next Due Date, October 20, 2015:
Bill is not paid.
Run the IO Interest Accrual Job.
Interest Accrued in Interest Component of IO = Share * Unpaid bill amount * Additional Interest Rate * one day as per Time Counting Method = (50/100) * 2092.81 * (5/100) * (1/360) = 0.15.