Payment Holidays
  • 21 Sep 2020
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Payment Holidays

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Payment Holidays

As we always strive to deliver high quality features in a truly agile way, at the beginning of March, a squad team was preoccupied with the design and implementation of Payment Holidays concept to address requirements resulting from COVID-19 (coronavirus) situation. Please find below the first design of Payment Holidays feature, which is now available to all Mambu customers via Mambu v9.43.0 release, and stay tuned as updates will follow.

What is Payment Holiday?

A Payment Holiday is a free-of-charge break in payments when a customer has difficulty paying back a loan. During the Payment Holiday period, no fee or penalty will be charged.

Product Definition

Dynamic Term Loan with Declining Balance Equal Installments Interest Calculation method:

  • Payment Method set to Standard Payments, and
  • Prepayment Recalculation Method set to one of the following methods:
    – On Next Installments pre-payment allocation
    – Reduce Number of Installments
    – Reduce Amount per Installments

Dynamic Term Loan with Declining Balance Interest Calculation Method

  • Prepayment Recalculation Method set to one of the following methods:
    – No Recalculation
    – Recalculate the Schedule, Keep the Same Number of Terms

Fixed Term Loan with Declining Balance and Declining Balance Equal Installments Interest Calculation Method

How do I configure Payment Holidays?

Using API 1.0

The functionality is exposed via API 1.0, through /api/loans/{ID}/repayments endpoint, using the PATCH HTTP method. Please find below an example of payload request:

{ "repayments" :
        "encodedKey": "8a8086157181c5d0017181d3d6900e39",
        "parentAccountKey": "8a8086157181c5d0017181d31c380e1b",
        "isPaymentHoliday": true
Please Note

That the functionality is available only for Loan Products that are defined using the above mentioned product configuration.

Using the Mambu User Interface

Loan Product Configuration
In the Repayment Scheduling section that can be defined when the Loan Product is configured, we have added under the Repayment Schedule Editing the Configure Payment Holidays option. This option will be visible only if the above mentioned Product Configuration will be used.
Configure Payment Holiday checkbox via Repayment Scheduling at Loan Product creation

Applying the Payment Holiday to a Loan Account
The Payment Holiday can be configured when editing the schedule via the Edit Schedule option that can be found under the More button. In this view a new column Payment Holidays was added.

Configure Payment Holiday via Edit Schedule at Loan Account Level

What will happen when Payment Holiday is defined?

The Payment Holiday feature was designed to cover various use cases like the ones mentioned below:

Payment Holiday with no Principal nor Interest
When this type of Payment Holiday is added:

  • Instalment(s) is marked as Grace.

  • Principal and Interest are set to 0.
    Interest accrued during Payment Holiday period can be applied after Payment Holiday period ends. We have 3 ways of applying the interest accrued during Payment Holiday period:

    • Apply accrued interest during Payment Holiday.
    • Apply the entire amount on one of the remaining installments (the total due will be increased with the interest amount).
    • Apply custom amount on multiple installments (the total due will be increased with the interest amount): this means that you can apply portion of the interest accrued during payment holidays amount on several installments or on all remaining installments.
  • The Schedule is extended with one or more installments depending on how the Payment Holiday was defined.

  • The maturity date of the loan account will be extended with the number of installments marked as Payment Holiday.

  • No Penalties or Fees are charged.

Payment Holiday with Principal, but no Interest
To achieve this use case, the Interest Rate or Interest Spread should be set to 0% for active loan accounts during the Payment Holidays period.

When will I NOT be able to add a Payment Holiday on an instalment(s):

  • When the Instalment(s) is in Paid or Partially Paid state
  • When Interest, Fees and/or Penalties are applied for that instalment(s)

Coming soon:

  • Adjustment of defined Payment Holiday period

Ask the Mambu Community

If you have any question or comments about Payment Holidays or have come across something you haven't seen explained here, check in with our community of fellow users and Mambuvians where someone will lend a hand.

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