The Loan Settings dialog provides a variety of options to adjust Moneylender's behavior when calculating a loan.
The Loan Engine determines which routines will be responsible for various records. For example, Moneylender has four different interest routines - a scheduled interest routine, a daily interest routine, an Average Daily Balance interest routine, and a precomputed interest routine. Selecting the correct loan engine will determine which of these routines will handle the interest calculations on the loan.
Amortized - This is perhaps the most standard type of loan, useful especially for car loans, in-house financing, hard money loans, student loans, and any other loan which will have interest on a set schedule and payments on a set schedule.
Amortized with Daily Interest - Another very common choice, this engine is similar to the Amortized engine except that the interest is determined based on the number of days between various events on the loan. For example, when a payment is applied, Moneylender will calculate the number of days since the last interest calculation, and add that many days of interest to the loan before applying the payment.
Amortized with Suspense Account - This is the ideal engine for mortgages that will have escrow accounts. While you can use the other two amortized engines with escrow accounts, this variant will hold payments that arrive early until the due date to ensure the regular escrow charge has become due before applying the payment to the balances on the loan. In all other respects it behaves the same as the Amortized engine.
Line of Credit - Average Daily Balance - This engine allows for some unique opportunities for both the interest amount and the regular payment. With this engine, you can set a minimum finance charge for any period, so even low balances will incur the minimum interest (if the balance is zero, no interest is charged even with a minimum set). The balance is averaged over the days of each cycle, and the average daily balance is used to determine the interest for the cycle.
Line of Credit - Daily Interest - This will calculate a line of credit using the daily interest mechanism, determining the number of days between draws or payments and adding the interest accordingly. Because interest may be added to an account multiple times during a single cycle, it cannot be used in conjunction with the minimum interest charge like the ADB engine.
Precomputed Loan - This engine will total up the amount of the scheduled payments. The amount in excess of the initial principal is added to the beginning of the loan as precomputed interest. No further interest calculations are performed, so the scheduled amount to pay is the amount necessary to satisfy the loan, regardless of the time it takes for repayment to occur. Late fees and other fees may be added to the loan if payments do not arrive according to the schedule.
Informal - Informal loans don't expect any payments on any dates. The money will get here when it gets here, and we just want to keep track of the interest as time passes. If a regular payment is set on the loan, it is ignored. The due date will always be today's date on an informal loan, and the overall balance will always be the calculated balance for today's date. Good for tracking loans that do not have a set repayment.
Account Number - this is the number that uniquely identifies the loan between you and the borrower. This number should appear on any statements you send to the borrower, and the borrower can provide this number to you to help you find their account. They'll probably write this number on the Notes line on their payment checks. Once the loan is created, you should probably not change the account number unless you have a very compelling reason.
Daily Interest Modifier - For daily loans, and for scheduled interest loans that have long or short periods prior to the beginning of the normal interest schedule, this modifier will adjust how the daily interest is calculated. Most of these settings are common, with 1/365 being the default setting. This setting say that a day of interest will be the (principal * interest rate * 1/365) or a 1/360 rate would mean a day's interest was (principal * interest * 1/360). The difference is often only a few pennies, but you will want to make sure this setting matches the numbers calculated on your loan agreement.
Points Paid - This is money you received at the close of the loan to buy a lower interest rate. It appears on some of Moneylender's default reports, and will appear on certain tax forms that require points to be listed.
Credit Limit - This is the max allowed principal balance for a line of credit, or the initial loan amount for an amortized loan. When entering a construction loan, you may wish to put a cap on the loan in this box. When you create a line of credit through the wizard, this amount will be set from your entry in the wizard.
Origination Date - The date the loan was created. This is usually the same as the date of the first principal disbursal on a loan and the date interest first takes effect. If you purchased the loan from another lender, the origination date should indicate the date the loan was created, not the date you took ownership.
Date Took Ownership – This is the date when the lender in Moneylender took over the loan. If a loan began as an application, this is the date the application was marked as approved and became a loan.
Payment Continuation – This setting determines what will happen when the loan reaches the final scheduled payment date – the maturity date. A portfolio-wide default can be set from the Portfolio Settings dialog. Each loan can have this default overridden.
- Do Nothing – Moneylender will expect the remaining balance to be paid off on the last payment date. You can increase the payment count or add additional payments to the loan to extend the loan.
- Expect Payments but No Late Fees Charged – Moneylender will continue to expect payments at the payment amount from the last payment setting on the loan. Late fees will not be added for these extended payments, however.
- Expect Payments and Late Fees Are Charged – Moneylender will continue running the last payment setting indefinitely and any late fees that would be in effect are assessed and added to the loan as if the user had manually extended the last payment setting.
Grace Period - You can have the loan use the portfolio default setting, or specify a grace period specifically for this loan. If payments are due on the first, and the grace period is 10 days, a late fee will be added at the beginning of the 11th day.
Overpayments Carry Forward - If your borrower pays extra, with the expectation that overpayment will lessen the amount due for the following due date, check this box. If the borrower then makes a payment to pay down the principal, record the extra payment as a Principal payment so it does not push the loan excessively far into the future. When this box is not checked, Moneylender will manage whether all or part of a payment will apply to an upcoming due date.
Daily interest forces all months to have 30 days - Best used in conjunction with 1/360 for the Daily Interest Modifier, the daily interest routine will ignore the 31st of any month, and will add a day or two to February so that exactly 30 days of interest will be added for each calendar month, while still calculating daily interest between payments, charges and disbursals on the loan.
Pay regular payment P&I before fees. - Check this box to have Moneylender pay the currently due interest and principal first, and then pay unpaid fees if sufficient funds are still available from a payment. If unchecked, Moneylender will use funds from payments to pay all fees due before paying interest and principal.
Pay regular payment P&I before escrow. - Check this box to have Moneylender pay the currently due interest and principal first, and then pay any due escrow if sufficient funds are still available. If unchecked, Moneylender will use funds from payments to pay all due escrow before paying fees, interest and principal.
Ignore portfolio's future days on overpayments. - Moneylender will allow overpayments to apply to upcoming due dates if the payment arrives after it would have been possible to send out a regular statement for the upcoming due date. This comes from the "On statements and main window, use amount due from X days in the future" on the Portfolio Settings > Numbers tab. If you use a days in the future setting that is nearly as long as the payment cycles themselves (25 days on monthly loans, for example), some overpayments may be allowed to carry forward unexpectedly as a result. Check this box to have the carryforward system ignore the look ahead when deciding how much overpayment to adjust.
Simple vs. Compound Interest - USE SIMPLE INTEREST. That stated, here's the difference: Simple interest is calculated based on the principal balance on a loan; Compound interest will calculate interest on the outstanding principal, interest and fees on a loan. Compound interest is outlawed in many locations, and is otherwise only collectable if the loan agreement specifies that the interest is calculated based on the accumulated and unpaid interest and fees in addition to the principal balance. If you have no such wording in your contract, use simple interest. There are some countries where there are few or no lending laws, and it may be a local custom to collect compound interest. In that case it is ok to use compound interest. If you have a mortgage, car loan, or hard money loan use simple interest.
Follow Rule of 78s - only compatible with the Precomupted loan engine, check this box to have the Rule of 78s applied by the payoff calculator.
Payment holding stops when loan is X% of a regular payment past due. - Use this setting to control the cutoff when Moneylender will stop holding payments for upcoming due dates and instead apply payments right away to get the loan caught up. You can adjust this to adjust behavior when a borrower is constantly paying less than they owe and you want Moneylender to pretent everything is normal for a longer period of time.
Loan Collateral - You can enter up to 500 characters in this box describing the property that will be securing this loan. You can use the enter key in this box to put items on separate lines if desired.
AutoPay Identifier – this is some information that the borrower will immediately recognize as associated with the loan. Some examples might be the year make and model on a car loan, or the property address on a mortgage. This can also be left blank if the borrower will recognize your company name and/or the loan’s account number. When enabling AutoPay on a loan, you will have the opportunity to select or enter an identifier, so it is only necessary to use this box on the Loan Settings window if you want to change the identifier on a loan that is already enrolled in AutoPay.
Parent Loan / No Parent Loan – Choosing a parent loan will cause Moneylender to add payments to this loan to keep pace with the chosen parent loan. This is commonly called a wraparound loan. You can choose how Moneylender will determine the amounts on the payments that it adds to this loan:
- Match Due Date – Moneylender will add payment amounts that are sufficient to pay the scheduled amounts so this loan’s paid through date will always be at least the paid through date on the parent loan. If the parent is paid through April 1st, Moneylender will add a payment to this loan that is enough to pay it through April 1st as well. If the parent loan has a payment that pays down the balance on the loan, the paydown is not carried over to this loan. With this setting, the loan will amortize normally regardless of overpayments on the parent.
- Proportional Balance – Moneylender will add payments to this loan to match the principal paid by each payment on the parent loan proportionally. If a payment pays 1% of the parent loan’s principal, Moneylender will add a payment to this loan that is enough to pay 1% of the current principal balance. With this setting, the loans will typically be paid off at the same time.
- Match Principal – Moneylender will create payments that are sufficient to pay the child loan so that the same amount of principal from each payment on the parent loan is also paid on the child loan. With this setting, all principal recovered is essentially applied to the child loan.
Custom Fields - If you have added custom fields in the Portfolio Settings, the boxes for Loan custom fields will appear here, and you can supply the data as desired.
Click Save to update the loan and recalculate the balance using the new rules. Click Cancel to abandon any changes and close the window.