1. Bilateral Loans
  2. Processing Repayments
  3. Specifying the Preferences of the Contract
  4. Defining Installment Schedules for Loans
  5. Processing Late Payment

7.8.2.1 Processing Late Payment

During the payment of an overdue installment schedule, the principal and interest components are liquidated for the overdue amounts. The interest amount is recalculated on the outstanding principal for the overdue days. The Interest amount for the remaining days in the current schedule is calculated on the current principal outstanding. The principal and interest due amount for the subsequent schedules are recalculated with the new principal outstanding amount.

Note:

Loan repayment happens in multiples of installment amount and there are no partial prepayments for installment loans. During multiple overdue schedules it is paid on the same value date. You need to make separate payments if the value dates are different.

Example

A contract is booked with the following details.
  • Loan Amount - 1,000,000.00
  • Value Date - 1-Aug-08
  • Installment Schedule Start Date - 6-Oct-08
  • Maturity date - 31-Dec-09
  • Installment Amount - 50,000.00
  • Interest Rate - 4%
The schedule details are below.
Schedule Date Outstanding Principal Interest Rate Principal Due Interest Due
6-Oct-08 1,000,000.00 4% 42,767.12 7,232.88
6-Nov-08 1,000,000.00 4% 46,602.74 3,397.26
8-Dec-08 1,000,000.00 4% 46,493.15 3,506.85
6-Jan-09 1,000,000.00 4% 46,821.92 3,178.08
6-Feb-09 1,000,000.00 4% 46,602.74 3,397.26
6-Mar-09 1,000,000.00 4% 46,931.51 3,068.49
6-Apr-09 1,000,000.00 4% 46,602.74 3,397.26
6-May-09 1,000,000.00 4% 46,712.33 3,287.67
6-Jun-09 1,000,000.00 4% 46,602.74 3,397.26
6-Jul-09 1,000,000.00 4% 46,712.33 3,287.67
6-Aug-09 1,000,000.00 4% 46,602.74 3,397.26
6-Sep-09 1,000,000.00 4% 46,602.74 3,397.26
6-Oct-09 1,000,000.00 4% 46,712.33 3,287.67
6-Nov-09 1,000,000.00 4% 46,602.74 3,397.26
6-Dec-09 1,000,000.00 4% 46,712.33 3,287.67
31-Dec-09 1,000,000.00 4% 303,917.81 2,739.73
Now assuming the schedule due on 6th October is paid on the 20th October then the schedules are recalculated as below.

Interest for 14 overdue days is, 1,000,000 * 4% * (14/365) = 1,534.24

Remaining interest for schedule is 957,232.88 * 4% * (17/365) = 1,783.34

So total interest for Schedule due on 6th November is, 1534.24 + 1783.34 = 3317.58.

Principal Outstanding on 6th November is, 50,000 – 3317.58 = 46,682.42

Schedule Date Outstanding Principal Interest Rate Principal Due Interest Due
20-Oct-08 1,000,000.00 4% 42,767.12 7,232.88
6-Nov-08 957,232.88 4% 46,682.42 3,317.58
8-Dec-08 957,232.88 4% 46,643.13 3,356.87
6-Jan-09 957,232.88 4% 46,957.84 3,042.16
6-Feb-09 957,232.88 4% 46,748.03 3,251.97
6-Mar-09 957,232.88 4% 47,062.74 2,937.26
6-Apr-09 957,232.88 4% 46,748.03 3,251.97
6-May-09 957,232.88 4% 46,852.93 3,147.07
6-Jun-09 957,232.88 4% 46,748.03 3,251.97
6-Jul-09 957,232.88 4% 46,852.93 3,147.07
6-Aug-09 957,232.88 4% 46,748.03 3,251.97
6-Sep-09 957,232.88 4% 46,748.03 3,251.97
6-Oct-09 957,232.88 4% 46,852.93 3,147.07
6-Nov-09 957,232.88 4% 46,748.03 3,251.97
6-Dec-09 957,232.88 4% 46,852.93 3,147.07
31-Dec-09 957,232.88 4% 301,986.84 2622.55

Parent topic: Defining Installment Schedules for Loans