Pay Off a Loan
Overview
Loan payoff, or early repayment, occurs when a borrower completely repays the pending loan amount through a single payment. This is applicable for all lending products in CL Loan.
Payoff Tolerance
If the payoff payment amount is within the payoff tolerance limit, the loan goes to Active-Marked for Closure state. Payoff tolerance is the maximum amount that the system can allow to remain unpaid while paying off a loan. This applies to payoff done via the Payoff button and also any regular payment where the amount is at least (payoff - payoff tolerance). If a payment is a payoff, then the last accrual date (LAD) is set to the payoff date.
When a borrower pays off a loan with an amount that is less than the payoff amount but is within the predefined payoff tolerance limit, then the system generates the following two LPTs:
An LPT for the payoff amount.
Another LPT of the type, Closure-Tolerance, with the payment mode as Internal Transfer. This LPT amount is the difference between the amount to be paid (the payoff amount as calculated by the system) and the amount actually paid.
Example
Let us say a loan is created with the following parameters and disbursed on the same day:
| Field | Value |
|---|---|
| Loan Amount | 10,000 |
| Contract Date | March 1, 2013 |
| Payment Start Date | April 1, 2013 |
| Payment Frequency | Monthly |
| Payoff Tolerance Amount | 100 |
Let us say the borrower makes a payoff of amount 9,985. This amount is within the tolerance limits. (10,000 - 9,985 < 100)
Hence, the system creates the following two LPTs:
A regular LPT of the payoff amount.
An LPT of the remaining amount with the payment mode as Internal Transfer.
The system then marks the loan in the Active - Marked for Closure status. On the next day, when the LoanClosureDynamicJob runs, the system closes the loan with the status, Closed - Obligations met.
The following image depicts the LPTs created in the system:
The following image depicts the details of the Closure-Tolerance type LPT with Payment Mode as Internal Transfer created in the system:
Total Payoff Amount
The total pay-off amount in CL Loan is calculated by adding:
Principal remaining
Interest remaining
Fees remaining
Interest accrued till the payoff date
For information on recording a loan payoff transaction, see the Record a Loan Pay-Off Payment section of this guide.
Payoff a Loan
Prerequisites
None.
Steps
Perform the following steps to pay off a loan :
Log in to your Salesforce account.
Select the required CL Contract ID.
Click Transactions.
Select Payments.
Click Loan Pay Off.
Select the required Payment mode. These can be any payment mode that you have set up, such as, Cash, Check, Wire, ACH to name a few.
Click Save. The status of the loan changes to Closed- obligations Met.
If any payoff fee is present in the loan's fee set, it is reflected in the total payoff amount when a payoff quote is generated. A charge is created for the same, which is satisfied through the payoff amount. After a successful loan payoff, the principal remaining, fees remaining, interest remaining, all become 0 (zero).