Paying Off a Loan
  • 12 May 2022
  • 2 Minutes To Read
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Paying Off a Loan

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Article Summary

When you pay off a loan, you make a prepayment that covers the whole amount due as of a given date, when the client wants to fully pay their loan earlier than initially agreed and thus close their loan account. It is also sometimes called "early settlement" or "early closure" of a loan account.

To pay off a loan, you need to have the Pay Off Loan Accounts (PAY_OFF_LOAN) permission. If you want to waive or reduce some of the interest or fees that are due, then the Apply Loan Adjustments (APPLY_LOAN_ADJUSTMENTS) permission will be required in addition to the Pay Off Loan Accounts permission.

To pay off a loan, on the right-hand side of the account overview page, select Close > Pay Off.

Pay Off Loan pop-up with Principal Balance, Interest Balance, Penalty Balance, Pay Off Account, Channel, Repayment , Value date and Notes fields

If you don't waive any of the amounts due, when paying off a loan, there will be a repayment transaction logged for the remaining balances (principal + interest + fees + penalty, if applicable).

Please Note
A payoff action cannot currently be fully undone, the account can be reopened and the repayment transaction can be manually reverted, but the interest, fees and penalty reductions would remain in place.

When paying off a loan, the sequence of events happening in the back-end is the following:

  • Any future interest (not yet due or pre-paid) will be ignored or not considered due and will not be included in the amount to be paid to close the account
  • A repayment transaction is logged for the total amount paid
  • The account is automatically closed (with all obligations met)
Please Note
When paying off a dynamic loan, the interest balance and penalties balance also contains the accrued interest and penalties. So when closing the account, Mambu will apply the interest and penalties until the current date unless the user subtracts the accrued amounts from the balance.

Preview payoff for a future date

To preview the balances of a loan in case of a payoff on a future date:

  1. Open the loan account.
  2. On the right-hand side of the screen, select Close > Pay Off.
  3. In the Pay Off Loan dialog, select the Future date option in the Value Date (Entry Date) field.
  4. The payoff amount for the date you selected will be displayed.

Payoff value date options - Now or future date

To preview all the balances of the loan on a particular day, select the future date from the calendar. The system will automatically calculate the balance for that day.

The balances are calculated as per below example:

  • Principal balance: USD9000

  • Interest balance: USD90.07 = USD82.85 (today interest balance) + USD7.22 (future interest for X days, starting from tomorrow)

  • Fee balance: USD280 = USD280 (today fee balance) + USD0 (future fees during X days, starting from tomorrow)

  • Penalty balance: USD472.73 = USD354.55 (today penalty balance) + USD118.18 (future penalty during X days, starting from tomorrow)

  • Total payoff balance: USD9842.80 = USD9000 + USD90.07 + USD280 + USD472.73

Preview pay off for a future value date where date is selected from the calendar

Please Note
This option is only to preview the balances for future dates and not to perform the actual payoff for a future date.

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