Specifying the Payment Method

3.2.1 Specifying the Payment Method

You have to specify whether the payment method, for the main interest, is to be bearing, discounted or true discounted. This cannot be changed at the time of processing a loan.

Table 3-1 Payment Method

Field	Description
Bearing	The interest is liquidated on scheduled payment date(s). Example You have advanced Mr. Brian Williams a loan of USD 10,000 under the scheme Short-term Loans for Individuals at 10% interest for a year. Now, under the bearing type of interest payment method, the loan of USD 10,000 is advanced to Mr. Brian Williams and the interest on it is collected over a year, which is the tenor of the loan.
Discounted	In this interest payment method, the interest payable on the loan is deducted from the principal at the time of initiating the loan. Example You have advanced Mr. Brian Williams a loan of USD 10,000 under the scheme Short-term Loans for Industries at 10% interest for a year. Under the discounted type of interest payment, the total interest (USD 1,000) calculated on USD 10,000, for the tenor of the loan, is deducted from the principal (USD 10,000) and only USD 9,000 is advanced.
True discounted	In this interest payment method, the interest is calculated on the principal in a manner differing slightly from the Discounted method. The interest rate is applied on the Principal instead of the Nominal, as is done in the Discounted method. Example You have advanced Mr. Brian Williams a loan of USD 10,000 under the scheme Short-term Loans For Industries at 10% interest for a year. Under the true discounted type of interest payment, the interest amount, in absolute terms in not USD 1,000 but less than that. This is because the interest rate of 10% is not applied on USD 10,000 but on the actual amount disbursed (derived by the system) which is USD 9090.91. In short, in Discounted method the interest is calculated on Nominal whereas in case of True discounted method, the same is calculated on the Principal.

Field

Description

Bearing

The interest is liquidated on scheduled payment date(s).

Example

You have advanced Mr. Brian Williams a loan of USD 10,000 under the scheme Short-term Loans for Individuals at 10% interest for a year. Now, under the bearing type of interest payment method, the loan of USD 10,000 is advanced to Mr. Brian Williams and the interest on it is collected over a year, which is the tenor of the loan.

Discounted

In this interest payment method, the interest payable on the loan is deducted from the principal at the time of initiating the loan.

Example

You have advanced Mr. Brian Williams a loan of USD 10,000 under the scheme Short-term Loans for Industries at 10% interest for a year.

Under the discounted type of interest payment, the total interest (USD 1,000) calculated on USD 10,000, for the tenor of the loan, is deducted from the principal (USD 10,000) and only USD 9,000 is advanced.

True discounted

In this interest payment method, the interest is calculated on the principal in a manner differing slightly from the Discounted method. The interest rate is applied on the Principal instead of the Nominal, as is done in the Discounted method.

Example

You have advanced Mr. Brian Williams a loan of USD 10,000 under the scheme Short-term Loans For Industries at 10% interest for a year. Under the true discounted type of interest payment, the interest amount, in absolute terms in not USD 1,000 but less than that. This is because the interest rate of 10% is not applied on USD 10,000 but on the actual amount disbursed (derived by the system) which is USD 9090.91.

In short, in Discounted method the interest is calculated on Nominal whereas in case of True discounted method, the same is calculated on the Principal.

Table 3-2 Amortisation Preferences

Field	Description
Allow User Input Installment	During contract maintenance, you can maintain the installment amount for an amortized contact only if this box is selected at the product level. This box is enabled only for the schedule type Amortized.
Allow Re-amortization	Select this check box to indicate that re-amortization is allowed. This field is enabled only if the product schedule type is Amortized.
On Rate Revision	Select the appropriate value from the drop-down box. System displays the following values: I - Change Installment B - Change Bullet schedule This field is enabled only for Amortized products.
On Prepayment	Select an appropriate value from the drop-down list. This field will be enabled only for Amortized products. The following values are displayed: Change Installment Change Bullet System defaults Change Bullet in this field.

Parent topic: Setting Product Preferences