In IPT-enabled, non-capitalized loans

  • Updated

In IPT-enabled, non-capitalized loans

In the case of a non-capitalized loan, the following field is updated for the adjustment of interest:

Adjusted Interest Non-Capitalized:

This field stores the value of the adjusted interest or the difference from the backdated payment date till the LAD date.

Example: Automatic interest adjustment for an IPT-enabled, non-capitalized loan in the case of a backdated payment

Let us understand how the system adjusts the interest automatically with the help of an example.

Let us say there is a loan with the following terms and conditions:

Events and calculations in a chronological sequence

Let us now look at the following tables to see how the system calculates interest and other parameters in chronological order of dates:

Date Action Calculations

March 1

 Payment of $2,000

  • Reserve Amount for Next Due = $2,000.

  • Principal/Advance Remaining = $8,000.

April 1

 None

  • Bill of $860.66 gets satisfied from the Reserve Amount for Next Due.

  • Interest Posted = 8000 * 30/360 * 6/100 = $40.

  • Last Accrual Date (LAD) = April 1.

  • Reserve Amount for Next Due = 2000 - 860.66 = $1,139.34.

April 30

 Payment of $500

  • Reserve Amount for Next Due = 1,139.34 + 500 = $1,639.34

  • Interest Posted of $40 is satisfied because of $500.

  • Principal/Advance Remaining = 8000 - (500-40) = 8000 - 460 = $7,540.

  • Loan Balance = $7,540

  • Interest Remaining = 8000 * 29/360 * 6/100 = $38.67.

May 1

 None

  • Bill of $860.66 gets satisfied from Reserve Amount for Next Due.

  • Reserve Amount for Next Due = 1639.34 - 860.66 = $778.68.

  • Interest Posted = (7540*6/100*29/360) + (7540*1/360*6/100) = $37.70.

  • LAD = May 1.

  • Interest Remaining = 0.

  • Loan is still in Active - Good Standing status as there is still some amount in Reserve Amount for Next Due.

May 6

 None

  • No change

May 9

 Payment of $2,000

  • LAD = May 9.

  • Interest Remaining = 7540 * 6/100 * 8/360 = $10.053.

  • Reserve Amount for Next Due = 778.68 + 2000 = $2,778.68.

  • Interest Posted of $37.70 gets satisfied.

  • Principal/Advance Remaining = 7540 - (2000 - 37.70) = $5,577.70

May 11

 Payment of $1,000

  • LAD = May 11.

  • Interest Remaining = 10.053 + 5577.70 * 6/100 * 3/360 = $11.91

  • Reserve Amount for Next Due = 2778.68 + 1000 = $3,778.68

  • Principal/Advance Remaining = 5577.70 - 1000 = $4,577.70

  • See the Loan Transaction Statement at this stage.
 

Backdated payment of $1,000 for

May 6

  • The system internally recalculates all the parameters from May 6 as explained in the following rows:
Internal recalculations from May 6 after the backdated payment
May 6 Payment of $1,000

  • LAD = May 6.

  • Interest Remaining = 7540 * 5/360 * 6/100 = $6.28.

  • Reserve Amount for Next Due =778.68 + 1000 = $1,778.68.

  • Interest Posted of $37.70 gets satisfied.

  • Principal/Advance Remaining = 7540 - (1000 - 37.70) = $6,577.70
May 9 Payment of $2,000

  • LAD = May 9.

  • Interest Remaining = 6.28 +6577.70 * 3/360 * 6/100 = $9.57.

  • Reserve Amount for Next Due = 1778.68 + 2000 = $3,778.68

  • Principal/Advance Remaining = 6577.70 - 2000 = $4,577.70.
May 11 Payment of $1,000

  • LAD = May 11.

  • Interest Remaining = 9.57 + 4577.70 * 2/360 * 6/100 = $11.10.

  • Reserve Amount for Next Due =3778.68 + 1000 = $4,778.68.

  • Principal/Advance Remaining = 4577.70 - 1000 = $3,577.70.

  • Adjusted Interest Non-Capitalized = 11.10 - 11.91= -$0.81.

  • An Adjusted Interest OLT gets created.

  • See the Contract Details at this stage.

  • See the Loan Transaction Statement at this stage.

Scenario: After a backdated payment on May 11 for May 6

Note:

To view a larger version of the preceding image, select this link: Image.

Tip:

To view the internal computations of this excel, download it here: Download Excel.

If you are trying to download this excel on an online PDF document and if you are unable to download, then you will have to download the PDF first to be able to download this excel.

Scenario: If the payment of $1,000 was actually made on May 6

Note:

To view a larger version of the preceding image, select this link: Image.

Tip:

To view the internal computations of this excel, download it here: Download Excel.

If you are trying to download this excel on an online PDF document and if you are unable to download, then you will have to download the PDF first to be able to download this excel.

Note:

The green colored rows in the preceding table indicate the internal calculations when a backdated payment for May 6 is made.

As observed from the preceding table, when a backdated payment is made on May 11 for May 6, internally, the system begins recalculating from May 6 as depicted by the rows in green color. It then finds out the difference between the current interest amount after the backdated payment and interest amount prior to the backdated payment and stores it in the Adjusted Interest Non-Capitalized field. This amount then gets adjusted in the interest of the next Interest Posting cycle.

Contract details on May 11 after a backdated payment for May 6

Note:

To view a larger version of the preceding image, select this link: Image.

Note:

To view a larger version of the preceding image, select this link: Image.

Note:

  • The Interest Remaining on the CL Contract Details page displays the value that was before the backdated payments. It does not display the value calculated internally after the backdated payment. The difference between the value before and the value after the backdated payment is displayed in the Adjusted Interest Non-Capitalized field.

  • If the system is not enabled for the internal adjustment of interest, you can make a payment again on May 11, 2015, but you could not make a payment before May 11, 2015. But, if the system is enabled for the internal adjustment of interest, you can do a backdated payment before an LAD date.

Loan Transaction Statements on May 11 before a backdated payment

Note:

To view a larger version of the preceding image, select this link: Image.

Loan Transaction Statement on May 11 after a backdated payment for May 6

Note:

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OLT Type: Adjusted Interest

Note:

To view a larger version of the preceding image, select this link: Image.

Adjusted Interest Calculations

In the case of a non-capitalized loan, the following field is updated for the adjustment of interest:

  • Adjusted Interest Non-Capitalized: This field stores the value from the backdated payment date till the LAD date.

    Thus, Adjusted Interest Non-Capitalized = 11.10 - 11.91= -$0.81.

    This interest is adjusted or added to the next Interest Posting amount. In other words, since there is an extra amount already paid after a backdated payment, it is reduced from the next Interest Posting amount.

Q2 Loan ServicingUser Guide for Simple Loans