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Introduction
Each lender is ready to provide their Potential Customers with Loans under specific conditions. Such conditions may depend on the business domain, country legislation, and of course, policies and business strategy of the Lender.
TurnKey Lender’s Credit Products functionality allows the Lender’s System Administrator to set up credit products of different complexity.
For example:
You can offer the clients a credit product with a 12-day grace period, 12% annual interest and an additional $35 fee once a repayment period.
You can also define the repayment priority (e.g. if the customer has only paid part of the payment, you will charge for the interest first then the principal, and any leftover amount will be used to pay the fees).
You can also specify how the overpayments shall be used (e.g. to pay off the future principle).
You can strictly define or allow your Customers to select the repayment period (installment) and the loan term.
You can specify other settings, as described in this article.
Access Credit Product Settings
Users with “System administration” permission can modify existing and create new credit products in the Settings → Loan Setting → Credit Products page.
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You can also duplicate a Credit Product (copy icon above) and then edit it to create a new, slightly different Credit Product based on the existing one.
Light and Advanced Mode
Whether you are creating or editing a Credit Product, you can do it in Light Mode or Advanced Mode.
Light Mode
In the Light mode, it is possible to create credit products with the most common settings in the industry. This is a simple and nice way to start:
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Set of pre-defined loan type templates (annuity, classic, payday, flat interest, bullet)
Set of typical repayment periods (monthly, semimonthly, weekly, biweekly)
Set of pre-defined fee templates (administration fee, origination fee, past-due interest, late fee, NSF fee)
Pre-defined and hidden general settings
Advanced mode
The Advanced mode doesn't have any predefined templates but instead provides flexibility to create an enormous number of different credit products.
Switching Between Modes
To switch from Light Mode to Advanced Mode, scroll to the bottom of the screen and click the “Use advanced mode” button.
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Available Settings
The list of settings may be outdated. Please check the functionality for the up-to-date list.
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Basic Settings
Basic settings are the same for both modes and include:
Name used in the UI to identify this Product (Name)
States or territories where the Credit Product is available (State management) - applicable only to the US edition and only if the State management is on.
Whether the Credit Product can be directly selected by the customer (Visible to customers): If disabled, the product can be selected from Back-Office or hidden behind a promocode.
Schedule building
A bunch of settings related to the main schedule-building rules:
Payment schedule
Payment schedule in the advanced mode
In the advanced mode, you can define due dates on the collection of the principal, accrued interest, and commissions owed by a borrower.
There are three approaches to Repayment Periods:
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In the Advanced Mode, lenders can create any schedule building rules as needed. It is easy to create Classic, Bullet, Flat Interest, and any other known schedule type, or a completely specific one.
Repayment Period
In the Light Mode, there are four pre-defined options.
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Below there is an example where the principal is accrued in the last installment, the interest - in the first installment, a fee - in every installment.
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Interest Calculation
Interest Rate
The interest rate can be specified in two ways:
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An interest rate base doesn't depend on the repayment periods, so the accrued interest value per installment depends on both these factors.
Example: if the repayment period = 1 month, then the interest can be calculated with bases 20% per year, $10 per week, $3 per day, etc.
Interest distribution
This feature allows creating schedules where interest depends on a number of days in the installment.
Fixed for Period - Interest Amount is calculated for a period (installment) and then divided into intervals within this installment.
This method is used to build typical Annuity and Classic schedules.Fixed for Interval - Interest Amount is calculated for each interval (day) within an installment. The total interest amount for an installment is a sum of all interval values.
This method can be used to build Annuity (daily based) schedule, for example.
Grace Period
A grace period can be specified for a credit product in a number of installments.
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In the Advanced Mode, it is possible to manage turn on/off accruing Interest, Fees and even the Principal during the grace period in any desired combination.
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Fee management
A credit product may contain an unlimited number of fees, each with its own periodicity, calculation and accrual rules.
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Several similar fees can be used simultaneously: such as more than one Origination Fee and so on.
Late Grace Days
During this period, no past due fees is accrued if an overdue installment takes place.
If the debt is not repaid till the Late Grace Period, on the following day the system applies past due fees for all days in Late Grace Period in whole.
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Effective interest rate
Effective interest rate is calculated for every loan according to one of the available methods:
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For every credit product, the minimal and maximal possible effective rate is auto-calculated to prevent exceeding the legal limits.
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Manage Accrual Priority
For every credit product independently, it is possible to change the accrual priority. It determines the order in which the principal, interest, and fees should be accrued if their accrual dates fall on one day.
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Manage Repayment Priority
For every credit product independently, it is possible to change the repayment priority. It means that a repayment transaction amount is applied to cover accrued principal, interest and all fees in the specified order.
This functionality is available both for Light and Advanced modes.
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Cash Flow
A Back-Office manager can see a detailed history of all accrued and repaid values for every installment.
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Payment Applying Settings
All received repayment transactions are applied immediately.
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Using various combinations of these options lets cover the best part of true-to-life business needs.
Pay Off
A borrower is allowed to close a loan early in case they pay the Pay Off amount. This amount is visible both on the Back-Office and Front-Office and depends on the current payment applying settings.
Pay Off transaction has a special type and can be applied on the current day only by a borrower or a Back-office manager.
Back-Office Front-Office
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Write Off
A loan can be written off manually (any moment, any Outstanding Balance) or automatically (Outstanding Balance < Write-off tolerance value, in Advanced mode only)
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