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Set up loan penalty calculation

You should complete the following four steps to configure penalties for the loan product.

Find loan product configuration

To find and access the loan product configuration:

Go to Loans > Products > Loan products.
Find the loan product in question.
Click on the Product name to access the loan product settings.

the BackOffice users with the EDIT_LOAN_PRODUCT privileges can edit the loan products.

Set up penalty grace days and amount

To set up and :

Find the Invoice rules section and modify the settings.

the default values for a new loan product are:

0 grace days - which means that the penalty starts calculating from the first day;
0 penalty amount - the penalty is calculated even if the unpaid overdue amount is 0.01.

Configure penalty for loan components

You can switch on the penalty calculation for the different loan components. To do that:

Find the loan component for which you want to enable the penalty calculation.
Select the checkbox for and modify the settings.

Field name

Type

Description

Base*

List

Select the value used to calculate the penalty. The possible values are:

Debt - only debt amount is used for calculating the penalty amount. Note: this should be the value that is usually selected.
Debt and Balance - both debt and outstanding balance are used for calculating the penalty amount.

Penalty type*

List

Select the penalty calculation type. The available values:

Fixed,
Floating,
Same as interest,
Floating penalty with interest.

Reference rate

List

Select the reference rate that is used. Note: this field is applicable only if the Interest type = Floating or Floating penalty with interest.

Negative rate handling*

List

Select the negative rate handling. It specifies the way how the system handles the negative reference rate. The predefined values are:

The negative base rate is changed to 0. If the reference rate value equals to or is smaller than 0, it is equated with 0. Only the contract margin rate is used for interest calculation.
The negative base rate is used, but the total cannot be negative. Thus, regardless of the reference rate value, it is used for interest calculation, but with the restriction that the total reference rate and the contract margin rate cannot be below 0.

Note: this parameter is available if the If Interest type = Floating or Floating penalty with interest.

Days in year*

List

Select which day-count convention is used for calculating the accrued interest. Predefined values available:

ACT/360 (actual number of days in a month and 360 days in a year),
ACT/365,
30/365,
30/360.

Note: this parameter is available if the If Interest type = Floating or Floating penalty with interest.

Define penalty rates

To define the penalty rates for each penalty type:

Find the Pricing rule for penalty calculation and adjust the settings.

Configure penalty for loan components

You can switch on the penalty calculation for the different loan components. To do that:

Find and access the page.
Find the loan component for which you want to enable the penalty calculation.
Select the checkbox for and modify the settings.

Field name

Type

Description

Base*

List

Select the value used to calculate the penalty. The possible values are:

Debt - only debt amount is used for calculating the penalty amount. Note: this should be the value that is usually selected.
Debt and Balance - both debt and outstanding balance are used for calculating the penalty amount.

Penalty type*

List

Select the penalty calculation type. The available values:

Fixed,
Floating,
Same as interest,
Floating penalty with interest.

Reference rate

List

Select the reference rate that is used. Note: this field is applicable only if the Interest type = Floating or Floating penalty with interest.

Negative rate handling*

List

Select the negative rate handling. It specifies the way how the system handles the negative reference rate. The predefined values are:

The negative base rate is changed to 0. If the reference rate value equals to or is smaller than 0, it is equated with 0. Only the contract margin rate is used for interest calculation.
The negative base rate is used, but the total cannot be negative. Thus, regardless of the reference rate value, it is used for interest calculation, but with the restriction that the total reference rate and the contract margin rate cannot be below 0.

Note: this parameter is available if the If Interest type = Floating or Floating penalty with interest.

Days in year*

List

Select which day-count convention is used for calculating the accrued interest. Predefined values available:

ACT/360 (actual number of days in a month and 360 days in a year),
ACT/365,
30/365,
30/360.

Note: this parameter is available if the If Interest type = Floating or Floating penalty with interest.