4.3.10 Maintaining Schedule Adjustments on Prepayment

When the principal pre-payment is made for amortized contracts, system re-calculates the installment amount based on the outstanding principal maintaining the same tenor. System, now, retains the original installment amount on pre-payment and reduces the balances on LIFO basis. To do this, you need to maintain the following:

• Select an appropriate option for the On Prepayment field (Loans and Commitment Product Maintenance). The options available are Change Installment and Change Bullet. This field is enabled only for Amortized products.

System performs the following validations/processing:

• Change Installment

  On prepayment for amortized contracts, the installment amount is re-computed and the new installment amount is re-distributed to the pending schedules maintaining the original tenor.

• Change Bullet

  System performs the following validations/processing to retain the original installment amount when the pre-payment is done for an amortized contract.

  If you select the Change Bullet option, then the outstanding schedules for the principal component is reduced starting with the bullet schedule (LIFO), and the interest amount is recomputed accordingly.

  If the pre-payment amount is sufficient to cover the bullet and prior schedules, then the amount due for these schedules equates to zero without changing the maturity date.

  When a payment is being done in the middle of a cycle and the limit date is entered, system computes the till date interest along with other components. The payment can be done for all or any specific component as required.

Schedule Adjustments Based on Prorata Prepayment

Pro rata is applicable only for bearing normal contract, the installment amount is recomputed and new installment amount is equally re-distributed to the pending schedules maintaining the original tenor.

In Loan and Commitment - Contract Input screen, the prorata amount along with the interest is displayed in the Amount field available under Schedules section.

The interest re-computation for future schedules are done based on the outstanding principal amount after prepayment.

The same amount is displayed in Amount Due in Payment Details screen. This screen appears when you click Payment Details button in Schedules tab.