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.

Understanding Light and Advanced Mode

Light Mode is Ideal for creating credit products using best practices and common industry settings, ensuring simplicity and efficiency.

Advanced Mode: Offers extensive flexibility to design a wide range of credit products without predefined templates. Due to its extensive flexibility, it's recommended that only TurnKey Lender support and implementation teams use this mode, as improper settings can significantly disrupt the system.

The following articles will describe work in the Basic Mode only

Basic Actions with Credit Products

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.

To add a Credit Product, click the “Add credit product” button at the top of the page.

To edit a Credit Product, click the pencil icon in the corresponding row of the Credit Products table

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.

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.

Available Settings

The list of settings may be outdated. Please check the functionality for the up-to-date list.

The following settings are available for a Credit Product

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:

Duration of the period as a number of Days, Weeks, Months, or Years. Examples: 10 days, 1 Month, 2 weeks
Number of repayments during a calendar period. Examples: 3 times per month, 2 times per year
Number of repayments during the whole loan term. Examples: 1 time (so-called 'Pay Day' loan), 4 times per Loan Term, etc.

In the Light Mode, the payment schedule can be automatically created subject to the chosen Loan type are built-in templates that allow creating typical credit products in a few clicks:

Payday
One-installment schedule
Annuity (installment based)
Installment interest value doesn't depend on a number of days in an installment.
Annuity (daily based)
Interest is calculated and accrued daily, so the result interest value for an installment depends on a number of days in this installment.

To compare the last two loan types, you can look into two schedule examples for the same loan amount, loan term and interest rate.

Annuity (installment based):

Annuity (daily based):

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.

In the Advanced Mode, any repayment period is allowed:

any number of days, weeks, month or years
several times per month, a year or even a loan term.

Examples: 2 months, 3 weeks, 18 days, 5 times per month, 2 times per week, 8 times per year, 3 times per Loan Term, etc.

The principal can be accrued in every installment or once in the last or in the first installment. The same, interest can be adjusted to the business needs.

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.

Interest Calculation

Interest Rate

The interest rate can be specified in two ways:

Percent (from the remaining principal)
15% per year, 10% per month, 0.5% per day
Amount
$100 per month, $20 per week, $1 per day

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.

In the Light Mode, there are two options:

'No Interest' means there are no payments during the grace period.
'Interest Only' means the borrower pays off only the interest and, if applicable, administration fee during the grace period.

Grace period type = 'Interest Only'

Grace period type = 'No Interest'

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.

Fee management

A credit product may contain an unlimited number of fees, each with its own periodicity, calculation and accrual rules.

There are three ways how a fee can be included into the repayment schedule:

it can be added to the initial schedule (origination fee, administration fee, etc.)
added on an event (past due fees, NSF, repayment fee, disbursement fee, etc)
added to active loan manually by a manager at any moment (toll fee, parking fee, etc.)

Each fee can have its own rate and calculation bases, it also can be accrued at the beginning or end of the repayment period (installment).
A fee accruing period can differ from the repayment period.

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.

Effective interest rate

Effective interest rate is calculated for every loan according to one of the available methods:

APR
XIRR
IRR

For every credit product, the minimal and maximal possible effective rate is auto-calculated to prevent exceeding the legal limits.

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.

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.

Cash Flow

A Back-Office manager can see a detailed history of all accrued and repaid values for every installment.

Payment Applying Settings

All received repayment transactions are applied immediately.

There are two options on how to close the current installment:

pay all the scheduled principal, interest and feed,
pay only the scheduled principal plus the interest and all fees accrued by the repayment day.

In the case of overpayment, there are more options.

The schedule for the further installments is not recalculated.
Overpayment is applied to close installments one by one in the specified processing order
- Forward from the next installment to the last installment
- Backward from the last installment
Overpayment is applied to reduce the remaining principal.
The schedule for the further installments is recalculated with the new remaining principal and the general rules for this credit product.

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

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)

Define Available Credit Products