The Terms Of A Loan Are Stored On A Contract
Loans are initiated by creating a loan contract type for a customer. The loan contract type (and its contract type) contains the loan's terms:
- The loan amount is held in the contract type's Total Amount to Bill.
- The customer's periodic payment amount is held in the contract type's Recurring Charge Amount.
- The number of amortization periods (e.g., 36 months, 240 months, etc.) is held in the contract type's Number of Payment Periods.
- If the interest rate is the same for all customers with this type of loan contract type, the interest rate is defined on the contract type's contract type (using a bill factor). If a specific interest rate applies to the customer, the contract type's interest rate is defined by specifying a bill factor value on the customer's contract type (where the bill factor value contains the specific interest rate for the customer).
- The contract type controls the periodicity of the bills (e.g., monthly or bi-weekly).
Because a loan is defined using a contract type, the typical functionality that is controlled by the contract type's contract type is supported, including:
- How and when it is billed.
- How payments are booked in the GL (and the payment priority relative to other contract types).
- How its debt is monitored by credit and collections.
- How late payment charges are calculated.
Loan contract types are created using start / stop just like all other contract types. The start/stop transaction has special loan functionality that allows an operator to specify the contract type-specific loan terms described above.
Note:
Automatic calculation of periodic payment amount / number
of periods. The system calculates a loan's periodic payment amount
or number of payments (whichever is left blank). You can have the
system do this on
Start/Stop Maintenance
(using the Calculate button that appears on the
start service confirmation window
), and on Loan - Main (by clicking the Calculate button).
Regardless of where you do this, the calculation is performed by an
algorithm on the loan's contract type. Refer to the LPDA-SI
algorithm
type
for more information about the base package algorithm.