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Arrears Settings

  • Updated on 08 Nov 2018
  • 4 minutes to read

Overview

Arrears settings control how a loan's days in arrears should be calculated.

Please Note
These settings affect anything that is derived from a loan's days in arrears, such as penalties, notification templates, reports.


Arrears Tolerance Period

You can define a number of days of tolerance which allows loan repayments to be late while the account remains in Active state and hence not counting towards your PAR.

Some organizations use the arrears tolerance period, for instance, to give their field officers some time to return from the remote areas if they had to keep track of the collections offline and enter the collected repayments when they are back at the branch with internet access again.

The number of days you enter will determine the period that a loan account with late repayments will remain Active. After this period Mambu will automatically change its state to Active (in arrears), in case there are still late repayments.

If you choose not to determine an Arrears Tolerance Period, Mambu will automatically set the loan account to Active (in arrears) as soon as an installment is due and no payment has been received.

The tolerance period is defined under the loan products. When creating or editing a loan product, enter the number of tolerance days in the Arrears Tolerance Period field. You can also establish a minimum and maximum value for the period, thus enabling the user to determine the arrears period at account creation within these constraints.

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Days in Arrears indicator - on loan accounts, as well as in custom views, you can see the number of days a loan is late. This indicator excludes the arrears tolerance period and it’s displayed even when the account is not yet in arrears, due to the tolerance period.


Arrears Days Calculated From

The Arrears Days Calculation method will determine how the days in arrears will be counted for your loans. Depending on internal policies, some organizations count the days in arrears from the first date the loan had a late repayment (“Date Account First Went Into Arrears”), whereas others consider the date of the currently oldest late repayment (“Date of Oldest Currently Late Repayment”).

Arrears Non- Working Days Method

The last setting allows you to determine whether the day count of days, before the loan is set in arrears, should include or exclude Non-Working Days as per your holidays settings.

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As an example, please consider the following loan:

  • a total of $6,000 flat fixed loan
  • disbursement date: 31st Oct
  • schedule: 4 weekly instalments
  • weekly repayments due on the following dates: 7th Nov (Friday), 14th Nov (Friday), 21st Nov (Friday) and 28th Nov (Friday)
  • days of arrears tolerance period: 3 days
  • the arrears days calculation excludes non-working days

Scenario 1: today is 21st Nov (Friday) and no payment has been made yet.

  • Fri, 7th Nov - the first payment due
  • Sat, 8th Nov - excluded
  • Sun, 9th Nov - excluded
  • Mon, 10th Nov - 1st day of arrears tolerance period
  • Tue, 11th Nov - 2nd day of arrears tolerance period
  • Wed, 12th Nov - 3rd day of arrears tolerance period
  • Thu, 13th Nov - 1st day a loan is set into “In Arrears” after the tolerance period

Scenario 2: today is 21st Nov (Friday) and there’s a repayment entered that covers only the first installment - interest and principal due from 7th Nov - as per the schedule below:

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If you choose the “Date Account First Went Into Arrears” option the number of Days In Arrears for this loan will not change and will still show 8 Days (Since Nov 13, 2014). So with this option, even though there was a repayment, the account remains in arrears because counting of days in arrears started on the Nov 13th when the account first went in arrears.

If you choose the “Date of Oldest Currently Late Repayment” option the number of Days In Arrears for this loan will now show only 1 day in arrears (Since Nov 20, 2014). With this option, although the account remains in arrears after the repayment, the Days In Arrears period is re-calculated as follows:

  • Fri, 14th Nov - currently the oldest payment due
  • Sat, 15th Nov - excluded
  • Sun, 16th Nov - excluded
  • Mon, 17th Nov - 1st day of arrears tolerance period
  • Tue, 18th Nov - 2nd day of arrears tolerance period
  • Wed, 19th Nov - 3rd day of arrears tolerance period
  • Thu, 20th Nov - 1st day a loan is set into “In Arrears” after the tolerance period

Scenario 3: today is 21st Nov (Friday) and there’s a repayment that covers all the amount due: 2da7b85f-5b6b-474d-bd12-354b33867e44.png

All the amount due up to date has been paid, therefore the loan account state changed from “Active (In Arrears)” to “Active” and the number of Days In Arrears for this loan is 0. 

This resets the Arrears calculation. If after changing its status back to “Active” the loan goes to “Active (In Arrears)” again, all the calculation of the Days In Arrears for this loan will start all over again from the date when its status changed to “Active”.

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