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Repayment Date: Date when the payment was done.
Introduction
Understanding Repayment Modes
A repayment mode is a rule that regulates Repayment modes constructor allows defining rules that regulate how the funds transferred by the customer are allocated among their payables.
In simple terms, it is an ordered list of steps applied to the payment.
There are two types of steps:
Repayment Steps: Funds are used to cover a specific payable
Recalculation Steps: The rest of the payables are recalculated and allocated among the installments.
Basic Modes
Initial Payment Mode: This mode is available by default and has an only step: all the funds are used to pay the initial payment. Maximum amount available for this mode cannot exceed the initial payment.
Pay-off Mode: This mode is available by default only available to pay off the principal and all the interest and fees as of the current date and used for this purpose.
Other Modes
All other modes depend on the company, their policies and procedures. For each mode, it is possible to define:
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There are three system-wide repayment modes available by default, but it is also possible to add some custom ones and define their settings for each credit product.
Adding a Custom Repayment Mode
To add a custom repayment mode to a credit product:
Go to the Settings → Loan Settings → Credit products and click the pencil icon by the credit product name
In the emerged window, open the “Repayment modes” tab and click the “Add repayment mode” button
Name and Descriptions
The mode name and description are displayed when selecting how the payment shall be allocated. It is important that other users and customers can understand what this mode is dedicated for
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Availability
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The mode availability defines if this mode can be available for
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Customers and/or
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Max payment amount: For some modes it is important to define a repayment limit. This way you can ensure that there are no left-over funds after all the steps of the mode have been performed.
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Steps: Ordered list of repayment and recalculation steps.
The user can easily add steps from the dropdown at the bottom of the following form. The logic of steps performance and types of steps are described further in the document.
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Back-Office.
This means that when manually initiating a payment, they will see this mode in the selector.
Max payment amount
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Define the maximum amount of the transfer that can be performed if this repayment mode has been selected.
Available options are:
No limit
Outstanding principal
Sum of postponed fees
Sum of special fees
Payoff amount
Adding Steps
As it has been mentioned before, each repayment mode is a set of steps performed with the transferred amount.
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The step are allocated in groups, subject to the installment they are related to:
We’ve strived to make the step names rather simple and easy to understand, however, should there be a doubt, select the step in the drop-down and its detailed description will appear below it.
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If this is the step you need, click the “Add step” button, and the step will be added to the list
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When there is more than one step in the list, you can use the up and down arrows to move the steps around the list.
The logic of the Mode Steps Performance
The system performs or attempts to perform repayment and recalculation steps in the order they are placed on the list. We can virtually divide the steps into:
Repayment
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Steps: related directly to the usage of the transferred payment
Recalculation Steps: related to recalculation of the loan fees, interest and principal in consideration of the previous repayment steps.
The system performs repayment steps in the order of their placement on the list until whole payment amount is used up, i.e.
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If the amount is not enough to cover the step in full, it covers it in part and moves on to perform the remaining recalculation steps in the corresponding order. It does not perform any other repayment steps.
If the amount is enough to cover the steps in full, the system covers the step, and
If the next step is a repayment step, the system tries to perform it (as in 1)
If the next step is a recalculation step, the system performs it and moves on to the next step
The system continues, until the repayment amount is used up and all recalculation steps are performed.
Repayment Steps List
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Repayment Steps
To understand the repayment steps, it’s important to be aware of the following terms:
Repayment Date: Date on which the transaction has been made (via a payment system) or date with which the transaction has been registered in the system manually.
Due Date: The day on which the installment has to be paid-off in compliance with the payment schedule for the loan.
I’d suggest then adding such sections:
Early repayments
On due-date repayments
Delayed repayments
Recalculation
Early repayments
If an early repayment step has been selected, it will be applied only if the Repayment Date precedes the Due
CurrentDebtStep → Current installment
Info text: Use the available amount to cover the fees, interest and then (if possible) the principal of the instalment that has started and has not finished before or on the Repayment Date
CurrentRecalculateStep → move to Recalculation Steps
EarlyPayCurrentDebtStep → Current fees and interest
Info text: Use the available amount to cover the fees and interest due for the instalment that has started and has not finished before or on the Repayment Date
ExtraOverpaymentStep → Future principal
Info Text: Use the available amount to cover the current installment and then (if possible) cover the remaining principal of the loan in part or in full.
FutureDebtStep → Future installments
Use the available amount to cover upcoming installments starting with the next one. (The fees and interest and then, if possible, the principal of the nearest installment, then of the next installment after next, etc.)
FutureDebtReversedStep → Future installments reverse
Use the available amount to cover upcoming installments starting with the last one. (The fees and interest and then, if possible, the principal of the last scheduled installment, then of the one before last, etc.)
InitialPaymentStep → Initial payment
Use the available amount to cover all and any fees accrued before the start of the first installment.
PastDueDebtStep → Past installments
Use the available amount to cover the fees, interest and then (if possible) the principal owed on the Repayment Date ??? ВОПРОС - do we first pay the fees, interest and principal of the most overdue installments, then of the next one, etc. Or do we cover all the fees due, then all the interest due and then all the principal due on the Repayment Date?
Cover the overdue payments missed in the past starting with the fees.
Use the available amount to cover
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RemainingCurrentPrincipalStep
suggested screen name: Current Installment Principal
suggested description: Available repayment amount is used to pay off the principal due for the installment actual for the Repayment Date
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PayOverpaymentStep - ???
RECALCULATION AND BALANCING
CurrentRecalculateStep
suggested screen name: Recalculate Installment
suggested description: Recalculate fees and interest for the installment
suggested info text: Apply the step after Current Installment Principal or Current Installment Full to recalculate outstanding fees and payments for the installment. Don't add the step to keep the initial payment schedule.
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suggested screen name: Recalculate Loan
suggested description: Recalculate the loan schedule
suggested info text: Apply the step to recalculate the loan schedule if the repayment amount was used for any early payments.
Options:
suggested selector info text: Decide how the payment schedule shall be updated if the total due amount is changed.
Option 1
Current name: Keep initial value
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Option 2
Current name: Recalculate always
Suggested name: Reduce payments
Suggested hint: Loan payment schedule stays the same
Availability
Hint: If you choose Back – only your staff can log repayments. If you choose Front – borrowers can do it themselves.
Steps hint: Prioritize or remove steps of the repayment mode in a way that reflects the order in which you’d like to cover what is owed to you including all the fees, interest, and principal of the loan.
Cover the overdue payments missed in the past starting with the fees.
Current principal early payment
Covers the principal debt accrued as of the repayment time in the current installment.
Recalculate current installment
Recalculates the sum owed within the current installment. This affects the fees and interest to be accrued as they are based on the reduced principal.
Remaining recalculate step
Recalculates all future installments if there has been an overpayment which reduced the principal.
Future debt
Future debt reversed
Covers upcoming installments starting with the last one without recalculating the schedule.
Payoff
Standard payoff of the whole loan.
Special fees
Covers all the accrued special fees in the specified order.
Postponed fees
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Finalize the Repayment Mode Creation
Once you’ve defined all the steps and settings, click the OK button at the bottom.
When the Credit Product page emerges, click the OK button there as well to save the changes.