Pay off an AMZ based loan

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Pay off an AMZ based 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. 

The total pay-off amount in CL Loan is calculated by adding:

  • Principal remaining

  • Interest remaining

  • Fees remaining

  • Interest accrued till the payoff date

In the case of AMZ based loans, the interest is not accrued daily. Instead, it is posted only on the bill date or the interest posting date. The interest remaining, for payoff purposes, is calculated as the total unpaid interest from the last interest posting date up to the end of the balance term, as per the amortization schedule. In simpler terms, the payoff involves paying off the entire amount of the remaining payment schedule.

Payoff within the payoff tolerance limit / 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.  

Payoff tolerance is applied on the sum of Principal Remaining (PR), Interest Remaining (IR), and Fees Remaining (FR). If the payoff amount equals the PR+IR+FR, but there exists an unpaid IOA bill, the loan does not go to Closed-Obligations Met. Similarly, if the payoff amount is within payoff tolerance limits, but there exists an unpaid IOA bill, the loan does not go to Active-Marked For Closure status.

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.

For information on recording a loan payoff transaction, refer to section Recording a Loan Pay-off Payment.

 

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