Calculation 3.0 engine

Credit Product modes

Light mode 

In the Light mode, it is possible to create credit products with the most common settings in the industry. The best to start, easy to set up and use.  

General characteristics:

• set of pre-defined loan type templates (annuity, classic, payday, flat interest, bullet)

• set of typical repayment periods (monthly, semi-monthly, weekly, bi-weekly)

• set of pre-defined fee templates (administration fee, origination fee, past-due interest, late fee, NSF fee)

• pre-defined and hidden general settings (accrual priority, payment applying, etc.)  

Open

Advanced mode

The Advanced mode doesn't have pre-defined templates, but instead provides flexibility to create an enormous number of different credit products.   

Open

Loan Types

In the Light Mode, there 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. 

1. 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. 

2. 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:

1. 'No Interest' means there are no payments during the grace period.

2. '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)