- Updated On 02 Nov 2020
- 3 Minutes To Read
Payment Allocation Method
Allows you to define how the repayments should be posted in the repayment schedule.
When a repayment is entered for an account using Horizontal Payments it's the actual repayment schedule that will determine what should be paid first based on the due dates. The amount entered will always be used to pay each instalment and only move to the next instalment due, when the previous has been completely paid.
Fees and penalties are always associated to specific repayments and become due when that repayment also is due.
Accounts using Vertical Payments will be paid based on the account balances of principal, interest, fees and penalties, following the allocation order defined in the product.
Payments are allocated based on the type of outstanding balance (interest, principal, etc) regardless of the repayment schedule.
Fees and penalties are not tied to a specific date. As soon as they are applied they become due and can be paid at any point in time.
Please see Horizontal vs Vertical Payment Allocation.xlsx for examples of each payment allocation method.
Some organizations don't allow pre-payments for certain products, such as those using Declining balance methodology. By default, Mambu will show the option to "Accept Pre-Payments". If you want to disallow pre-payments for a specific product, click on the menu to select that option.
You have a set of additional options to configure for pre-payments, depending if the product has Fixed or Dynamic schedule calculation.
Accept Pre-Payment of Future Interest
Some organizations would like to allow their customers to pay in advance also the interest that is not due yet for upcoming instalments.
There are two options in this menu:
- Accept Interest Pre-Payment (available for fixed and dynamic products, default selection).
When you enter a pre-payment (that is, a repayment transaction entered before/in due date with an amount smaller than or equal to the total due), the interest accrued up to that moment will be applied and paid. The rest of the amount from that pre-payment will be allocated to the principal. The pre-payment will be entered in the current moment. This option is available for both fixed and dynamic product types. For dynamic accounts, the principal is reallocated based on pre-payment allocation methods.
- Accept Postdated Payments (available for fixed and dynamic products only from the UI, not via API). This will post the repayments in different future-dated transactions depending on the payment amount for the fixed accounts.
With this option, the user will be able to enter future repayment transactions. The user will see this option at the account level only, in the Repayment dialog if there is nothing due on the account. When a postdated payment is logged, a Repayment transaction and the Prepaid Interest applied will be logged with a future date: the due date of the pre-paid installment. The installment will be marked as paid on the schedule, and when cron will run on that due date, the Interest Applied transaction will also be logged.
For Dynamic Loans, Pre-Payment Recalculation Methods can also be used instead of the Accept Postdated Payments option.
Apply Interest on Pre-Payment
On Dynamic accounts, when a pre-payment is made it is usually desired to collect interest first, however for this to happen interest has to be applied before the pre-payment. By default Mambu is set to do this automatically, if this is not desired manual interest application can be selected. When manual is selected a pre-payment will cause interest to be applied after the payment.
For Dynamic scheduled accounts, this lets you define if and how the account recalculates the schedule when there is a pre-payment, you can find more information in the Pre-payment Recalculation Methods article.
Repayment Allocation Order
For cases of prepayments, partial repayments or fees and penalties payment, the allocation order defined at the product level will determine what will be paid first.
Suppose you wanted the principal to be paid first, then interest, fees and finally penalties. In this case Principal would be on top of the list and Penalties on the bottom.
To move the items, just click, drag and then drop them at the right place.
If you have a question about how anything works or have come across something you haven't seen explained here, get in touch with our community of fellow users and Mambuvians where someone will lend a hand.