1. Loan Servicing Setup Guide
  2. Appendix : Rounding Amounts and Rate Attributes

C Appendix : Rounding Amounts and Rate Attributes

Rounding Amounts

Generally in the lending industry, computed amounts (interest, fees, costs and so on) are rounded to the second decimal place. However, there are occasions where the rounding of the computed amounts has to be carried out using different methods. Oracle Financial Services Lending and Leasing supports the rounding, raising of or cutting off calculated amount.
  • Rounding will increase the resulting amount to next number up to the second decimal, based on values of third decimal.
  • Raising will always increase the resulting amount to next number up to the second decimal.
  • Cutting off will always cut the number after the second decimal.

Note:

The system rounds only calculated amounts (calculated fees, calculated payment, and so on) and not user-entered amounts.

You can choose the rounding method you want to use by setting the parameter value for system parameter CMN_AMOUNT_ROUND_METHOD on the Administration form (Setup menu > Administration master tab > System drop-down link > System Parameters link > System tab).

You can choose the rounding factor you want to use by setting the parameter value for system parameter CMN_AMOUNT_ROUND_FACTOR on the Administration form. Currently, Oracle Financial Services Lending and Leasing supports rounding up to two decimals only.

Examples of how resulting amounts differ by RAISE, ROUND, and CUTOFF:

Table C-1 Example 1: Amount: 234.136

Method Result
Round 234.14
Raise 234.14
Cut off 234.13

Table C-2 Example 2: Amount: 234.134

Method Result
Round 234.13
Raise 234.14
Cut off 234.13

Table C-3 Example 3: Amount: 234.1319999

Method Result
Round 234.13
Raise 234.14
Cut off 234.13

Rate Attributes

The system supports rounding of index rate to keep the rate calculation as simple as possible for the customers. The general practice is to round the rate to nearest eighth (1/8th) (to keep index rate in the multiple of 125) or fourth (1/4th) (to keep index rate in the multiple of 25). The system rounds only index rate and not the margin or final rate. You can define the index rounding method on the Product tab’s Product Definition screen for variable rate product.

Note:

Index rounding does not apply to fixed rate Loan.
The system currently supports the following rounding of methods.
  1. NO ROUNDING TO INDEX RATE
  2. INDEX RATE ROUNDED TO NEAREST.25
  3. INDEX RATE ROUNDED TO NEAREST.125

NO ROUNDING TO INDEX RATE:

Select this method for no rounding.

INDEX RATE ROUNDED TO NEAREST 0.25:

Select this method to round up to 1/4th (to keep the index rate in the multiple of 0.25).

Examples:

Table C-4 Example 1

Type Value
Current rate: 5.125
Round of rate: 5.25

Table C-5 Example 2

Type Value
Current rate: 5.124
Round of rate: 5.00

INDEX RATE ROUNDED TO NEAREST 0.125:

Select this method to round up to 1/8th (to keep the index rate in the multiple of 0.125).

Examples:

Table C-6 Example 1

Type Value
Current rate: 5.325
Rate rounded to: 5.375

Table C-7 Example 2

Type Value
Current rate: 5.312
Rate rounded to: 5.250