How to create new loan - Interest Recalculation

Beginning at the main screen, select Admin, then Products from the drop-down menu. This will launch the Products menu.

Select Loan Products.

Create Loan Product

Provide all the required input for the Loan Product Fields, also refer link:- Loan Products

In Loan product, Go to : Interest Recalculation.

On checking the check for Recalculate Interest will enable interest recalculation and opens up configuration fields.

Pre-closure interest calculation rule:-

This defines till when the interest should calculate on the event of pre closure.

Calculate till pre closure date -

On selecting this will calculate interest till as on closing date.

For example - suppose Loan closing date is on 20th,feb so will calculate interest till 20th, feb.

Calculate till rest frequency date -

On selecting this will calculate interest till the rest period.

For example - suppose Loan closing date is on 20th,feb so will calculate interest till 30th, feb.

Advance payments adjustment type:-

This defines on the event of advance payments how the repayments should get adjusted.

Reduce EMI amount -

Will reduce EMI amount on the advance payments.

Reduce number of installments -

Will reduce number of installments on the advance payments.

Reschedule next repayments -

Will reschedule to next repayments.

Interest recalculation compounding on:-

None - Compounding will not happen, only interest recalculation will happen.

Fee - Compounding will happen on fee.

Interest - Compounding will happen on interest.

Fee and Interest - Compounding will happen on fee and interest.

Frequency for recalculate Outstanding principal:-

Once the client makes advance repayments, his outstanding principal may be recalculated on a weekly, fortnightly, monthly or quarterly basis, thereby reducing the weekly, fortnightly, monthly outstanding balance.

Frequency interval for recalculation:- This field accompanies the 'Frequency for recalculate outstanding principle'. Ex:- Selecting the interval as 1 and the frequency as monthly, would result in the outstanding balance(reduction) being calculated for every month.

Frequency Date for recalculation:- The date on which reduced outstanding balance will be calculated.

Is Arrears recognition based on original schedule:-

Makes sure "Calculate interest for exact days in partial period" is Checked boxed

Loan production definition

Remains same for all the below example scenarios.

Original repayment schedule remains same for all the examples.

I.e Loan disbursement on 1st,Nov,2015. Repaid every 1 month for 10 months.

Scenario 1 - With below mentioned interest recalculation definition

Scenario 1 - Showing example of late repayment.

Client makes on time repayment for 1st installment i.e on 1st Dec. So for the unpaid on time installments i.e for Jan,Feb and March interest has recalculated as shown in the below screen shot example.

Scenario 2 - On advance payment - Should reduce EMI amount

With below mentioned interest recalculation definition

Scenario 2 - Showing example of Advance repayment - Should reduce EMI amount

Client makes on time repayment for 1st and 2nd installment i.e for 1st Dec and 1st Jan. And makes an advance payment as on 1st,feb(3rd installment). So for the remaining installments EMI amount gets reduced.

Scenario 3 - On advance payment - Reduce number of installments,

With below mentioned interest recalculation definition,

Scenario 3 - Showing example of Advance repayment - Reduce number of installments,

Client makes on time repayment for 1st and 2nd installment i.e for 1st Dec and 1st Jan. And makes an advance payment as on 1st,feb(3rd installment). So number of installments gets reduced to 9, instead of 10.

Scenario 4 - On advance payment - Reschedule next repayments

With below mentioned interest recalculation definition,

Scenario 4 - Showing example of Advance repayment - Reschedule next repayments

Client makes on time repayment for 1st and 2nd installment i.e for 1st Dec and 1st Jan. And makes an advance payment as on 1st,feb(3rd installment). So number of installments gets rescheduled

Scenario 5: Pre closing the loan with using pre-closure rule as:- Calculate till pre closure date	Scenario 6: Pre closing the loan with using pre-closure rule as:- Calculate till pre closure date
Loan product definition remains same as mentioned above, but in this example: Disbursement is done on - 1st, Feb, 2016	Loan product definition remains same as mentioned above, but in this example: Disbursement is done on - 1st, Feb, 2016
Click on Prepay loan button	Click on Prepay loan button
In this example prepaying loan on 10th feb,2016. Interest calculation is for - 10 days only, i.e till the pre closure date.	In this example prepaying loan on 10th feb,2016. Interest calculation is for the whole month, i.e till rest frequency period. Note:- Frequency for recalculate Outstanding Principal Is given as "Same as repayment period". So the calculation is considerad as the repayment period - for month. If it was "Daily" Then it would have calculated till that date i.e till 10th, feb in this example.