Optimized Payments for Declining Balance Equal Installments Loans

In this article, we discuss a feature that has been sunset, namely the optimized payments method for declining balance equal installments (DBEI) loans. Please refer to the warning message for more information. We offer an alternative optimized payments method. For more information, see Payment methods for declining balance equal installments loans.

Loans with large differences in the number of days between payments have equal installment dues, but the last installment is usually adjusted with the difference that comes from the irregular payment intervals, in some cases this makes it considerably larger than the rest.

Mambu has an option for equal installments loans, named “Optimized Payments”. If there is a large difference in the final installment amount to pay down the loan, it will be redistributed across all other installments to create a more consistent repayment schedule. To accomplish this, the schedule is created in three steps:

1. The standard schedule is calculated.
2. The difference between the installments is redistributed on the remaining installments.
3. The deviation per installment using the standard interpolation method is reduced.

Example

The following is an example with a comparison between the Standard and Optimized Payments methods.

The optimized payments steps are applied when creating or activating an account and will be reapplied when any changes are made to the schedule due dates or the number of installments.