3.2.21 Enabling the Customer Effective Loan Rate Option

The Customer Effective Loan Rate (TEAC) is computed using the following formula:

Where:

• r = TEAC
• Dk = amount of the Kth disbursements (m disbursements)
• qk = number of complete periods from the first credit transaction date to kth disbursement
• ek = fraction of period in the time interval from the first credit transaction until the kth disbursement

ek = ((DDk – DD1) /DP) – ((int (DDk – DD1)) / DP)

Where:

• DDk = Date of the kth disbursement
• DP = number of days in a payment period. This is computed by dividing the duration of the contract by the number of payments and rounding the result to the nearest number which divides 360 without leaving a remainder.
• int = Integer value.
• m = number of disbursements.
• Pj = Payment amount j.
• fj = fraction of period in the time interval from the credit transaction until payment j =

fj = ((PD1 – DD1) /DP) – ((int (PDj – DD1)) / DP)

Where:

• DDkj = Date of the kth disbursement
• DP = number of days of the payment period. This is computed by dividing the duration of the contract by the number of payments and rounding the result to the nearest number which divides 360 without leaving a remainder.
• PDj = date of the jth payment
• int = integer
• n = number of payments

The TEAC can be used for reporting in all the loan liquidation advices to the customer. For printing the customer effective loan rate in customer advices you can enable the Customer Effective Loan Rate option.

Additionally, you need to enable this option in the MM/Loans and Deposits Branch Conditions screen. The TEAC rates are computed during:

• Takedown
• Value Dated Amendments
• Contract amendments resulting in change of cash flows
• Partial or full pre-payment

Refer to the examples given in Accounting Entries and Advices topic to view examples of how the TEAC is calculated.