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Finance Charge Information tab

Navigation:  Loans > Loan Screens > Insurance Screen Group > Policy Detail Screen >

Finance Charge Information tab

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This tab is used in conjunction with Forced Placed VSI Insurance for loans with precomputed interest (payment method 3). The finance charge is the amount of interest added to the VSI premium. This amount is amortized each month and posted to the General Ledger. In addition, if the policy is canceled using the Cancel VSI transaction (2890-00), the unamortized amount is refunded to the customer as a principal decrease.

 

The amount of the finance charge is credited (or debited if a refund) to the General Ledger account set up for your institution using the Unearned Interest (Payoff/Force Place Ins) field on the GOLD Services > General Ledger > GL Account By Loan Type screen.

 

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Note: In Illinois, the insurance finance charge will accrue from the date opened instead of the first due date. The finance charge earnings are 1/30 of the monthly amortization for every day past the date opened. Once 30 days have been earned, your institution will continue to earn the same amount until the first due date.

 

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Loans > Insurance > Policy Detail Screen, Finance Charge Information Tab

 

The fields on this tab are as follows:

 

Field

Description

Original Amount

 

Mnemonic: INNORG

This field displays the original finance charge amount for the selected insurance policy.

 

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Note: You should not make changes to this field on this screen. Making changes to this field may require the P/I Constant to change, and changing the Finance Charge Original Amount here will not change the P/I Constant, nor will it credit your institution's applicable General Ledger account number. Instead, use the Loans > Insurance > Adjustments screen to cancel the insurance policy and use the Loans > Insurance > Force Place  to create a new force-placed VSI insurance policy.

Remaining Amount

 

Mnemonic: INNREM

This field displays the remaining amount of the finance charge that has yet to be earned by your institution (according to the Amortization Method). This amount may be refunded back to the customer if the selected insurance policy is canceled early, according to the Refund Method (see below).

 

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Note: You should not make changes to this field on this screen.

Amortized Amount

 

Mnemonic: N/A

This field displays the amount of the finance charge that has been amortized to your institution's General Ledger account. See below for more information.

 

The amortization method used to earn the finance charge amount is set up when the selected insurance policy is issued on the customer loans account. If Institution Option IHGL is enabled, the Cancel Other Insurance (tran code 2910-00), Force Place LPD Insurance (tran code 2870-71), and Cancel VSI Insurance (tran code 2890-00) transactions use amortization method 2 (Level Yield 2) for the amortization of the finance charge.

 

Possible amortization methods are as follows:

 

1 - Straight Line (Original Finance Charge x Remaining Term / Policy Term)

2 - Level Yield 2

3 - Take All in First Month

 

See the FC Amort field description on the Loans > Insurance > Force Place screen for more information.

Date Last Amortized

 

Mnemonic: INNAMD

This field displays the date the insurance finance charge was last amortized on the customer loan account.

Effective Date

 

Mnemonic: INNEFF

This field displays the amortization start date of the finance charge. This date is usually the same as the date the selected insurance policy was opened or the customer loan account was funded.

Refund Method

 

Mnemonic: INIMET

Use this field to indicate the method used to refund the finance charge in the event the selected insurance policy is canceled or the loan is paid off early. See below for more information.

 

Possible selections in this field are:

 

Method

Description

0 - Use Premium Method

This method uses the amortization method used by the insurance premium.

1 - Add-On Rate Method

Unearned Premium / 12 x Remaining Term of the insurance policy x Add-on Rate

 

Add-on Rate Calculation:

 

Total Payments = Original P/I Constant (LN78OP) x Original Loan Term (LNTRMO)

 

Interest Amount = Total Payments - Amount Financed (LN78OP)

 

Annualized Interest = (Interest Amount / Original Loan Term (LNTRMO)) x 12

 

Add-on Rate = Annualized Interest / Amount Financed (LN78OP)

 

Example:

Amount financed: 11688.67
Loan term: 13
Monthly payment: 1006.00

Total payments = 1006.00 x 13 = 13078.00
Interest amount = 13078.00 - 11688.67 = 1389.33
Annualized interest = (1389.33 / 13) x 12 = 1282.46
Add-on rate = 1282.46 / 11688.67 = .1097

2 - Use Loan Interest Method

This refund method is only for precomputed loans. If you select this refund method, the system refunds any finance charges back to the customer based on what is entered in the Refund Rule field on the Loans > Precomputed Loans screen. See the Refund Rule field on that screen for calculations and methods.

3 - Refund All If Flat Cancel

If the insurance policy is canceled with a Cancellation Code of 2 - Flat Cancel, the customer is refunded back the entire finance charge amount.

Amortization Method

 

Mnemonic: INIFCM

This field displays the method used to amortize the finance charge on the insurance policy, if applicable. See Amortization Methods for more information.

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