Loan Screens > Account Information Screen Group > Precomputed Loans Screen > Options field group

Entry: User, numeric

F/M: Yes

Mnemonic: LN78DR

Screen: Loans > Account Information > Precomputed Loans screen

This field provides you with a way to control the monthly amortization of interest to your General Ledger. It also controls how rebated interest is calculated at the time of payoff. Rebated interest at the time of payoff is generally controlled by state regulations. Some states allow the lender to collect a full month’s interest at payoff (1-day rule), while other states use the 15/16-day rule. Enter the number of days in this field, based on the state regulation which controls the loan.

To Amortize Interest to the G/L

If you enter “15” in this field, for example, the system will determine if it is to amortize interest to the General Ledger in the first and last months based on the following rules.

•At monthend, the first month a loan is opened, the system compares the Date Opened to the last day of the month and calculates the number of days.

•If the number of days is 15 or less (according to our example), the system will not amortize the first month.

•If the number of days is 16 or more, the system will amortize interest the first month.

To Calculate the Rebated Interest

At payoff, the system compares the day portion of the date opened to the payoff date. If the remainder (number of days) is within the Rebate Rule Days (15 or less), the system will not take any interest for the payoff month. If the number of days is 16 or more, interest is earned for the whole month.

Example: The Date Opened is 10-25-10 (the day of the month is the pertinent factor) and the payoff date is 1-17-11. Since more than 15 days have passed between 12-25-10 and 1-17-11, the system would collect a full month of interest for January. Had the number of days between 12-25 and the payoff date been 15 days or less when the payoff was calculated (Loans > Payoff screen), the system would rebate that month's interest to the borrower.

Note: In the 15/16-day rule, you cannot charge the borrower for that month’s interest during the first 15 days of each interest month. You can charge the borrower for a full month’s interest if you are 16 days or more into the interest month.

In the 1-day rule, you cannot charge the borrower for that month’s interest until 1 day after the effective day of the interest month.

An interest month is not the actual days of the month; it begins with the day of the loan effective date (day of the month the loan was opened). You do not count the day of the effective date when counting days elapsed. For example, if the loan effective date is 03/02/11, the interest month begins on the 2nd of the month. Using the 1-day rule, you would not be able to charge interest for that month until the day after the effective date. Using the 15/16-day rule, you would not be able to charge interest for that month until 15 days after the effective date.

If the Use Anniversary of First Due Date field on this screen is checked, the amortization of the unearned interest and the payoff refund is calculated as follows:

1.The first period for amortization is the period between the Date Opened and the First Due Date. (This could be any number of days; for instance, it could be 10 days, 30 days, or 45 days.)

2.For the following months, each period is calculated from the Due Date day to the Due Date day.

The Rebate Rule Days field is also used. For instance, if the Due Date was on the 5th and the Rebate Rule Days was 15, then at payoff, the system compares the Due Date day to the payoff date. If the remainder (number of days) is within the Rebate Rule Days (15 or less), the system will not take any interest for the payoff month. If the number of days is 16 or more, interest is earned for the whole month.

3.If the ?Renewal/Pro-Rate field on the Loans > Payoff screen is checked, the loan is paid off before the first due date. The interest is pro-rated based on the actual number of days during that period. (That period is from the Date Opened to the First Due Date.) After the First Due Date, the number of days is based on a 30-day month.