Rescheduling and Refinancing Loans
  • 27 Apr 2020
  • 5 Minutes To Read
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Rescheduling and Refinancing Loans

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Payment Holidays
If you are looking for Information on setting up payment holidays to help your customers through any difficulties caused by the current Coronavirus pandemic please see our dedicated payment holidays page.

Overview

There might be several reasons that require rescheduling or refinancing a loan, such as unexpected events like a natural disaster that prevent the client from keeping up with the repayments, or as part of a negotiation with the client. On the other hand you may have a client who has been making timely repayments and might just need more principal, which would require you to refinance (top-up) a loan. This section explains both features and how to use them.


Rescheduling

This option allows keeping the same principal balance (or reduce it), but creates a new schedule for the loan and, if needed, different loan terms.

When a loan account is rescheduled, you can redefine all the loan terms that were available when the loan was created, including the loan product, and also change the custom fields or the guarantees.

When performing a reschedule, the Loan Amount will be filled in with the original account principal balance and you can adjust that amount by clicking on the "Reduce Amount' box. If you reduce the amount, part of the principal remaining will be written-off.

By default, any interest, fees or penalties will be capitalised (written off) on the new account and not transferred from the old one:

  • You can write off balances completely or partially, by adjusting the amounts in the Outstanding Balances section
  • Disbursement fees (deducted/capitalized/upfront) will not be displayed anymore in reschedule form
  • The only fees which are transferred from the old account to the new one are Late Repayments Fees and Payment Due Fees

Both the original and the newly created accounts will have a Transfer transaction logged, to indicate the amount of principal that was rescheduled.


Refinancing

This option enables transferring the principal balance plus some additional amount to a new loan account, with new terms.

Loan refinancing allows you to set the "Top Up Amount" that should be added to the refinanced principal and change the Loan product for the new loan (if applicable).

By default, any interest, fees or penalties will be capitalised (written off) on the new account and not transferred from the old one:

  • You can write off balances completely or partially, by adjusting the amounts in the Outstanding Balances section.
  • Disbursement fees (deducted/capitalized/upfront) will not be displayed anymore in refinancing form, and, even if they are required on the product, they will become optional when disbursing top-up amount at refinancing.
  • The only fees which are transferred from the old account to the new one are Late Repayments Fees and Payment Due Fees

The new loan account will be in Partially Disbursed Account Sub-State and you will need to disburse the top-up amount, in a Disbursement transaction. No other transactions can be posted on the account until the top-up amount is disbursed.

Please Note
When Refinancing a loan account, the fees that were marked as Required when the Loan Product was defined will become Optional and can be applied on the Refinanced loan account at disbursement moment.

How to Reschedule / Refinance a loan account

To reschedule or refinance a loan account, open the Account  > click on Close > Reschedule / Refinance.

Close drop-down with options like Pay-Off, Refinance, Reschedule and Write-Off

Please Note
To reschedule / refinance a loan, users need the appropriate permission (Reschedule and/or Refinance), as well as the permission to "Create Loan".
The Reschedule and Refinance options are only visible when it is possible to perform those actions on an account.
The options are removed from the menu when:
  • the account principal balance is 0,
  • the account is locked, or
  • the account is partially disbursed.

In the new window you'll see different fields to fill in:

  • Loan product. By default the same product of the original account, which can be changed.
  • Loan amount. By default the amount displayed here corresponds to the principal that was still due in the loan you're now rescheduling/refinancing.
  • Interest Rate. By default, this will be the same interest rate that was being applied to the previous account, can be changed according the selected loan product.
  • Number of Installments. Enter the number of installments for the rescheduled loan.
  • Guarantors / Collateral.
  • First Repayment Date. This corresponds to the first repayment date of the new loan.
  • Custom Fields. Depending on the chosen loan product

After entering the new terms you can see how the repayment schedule will look like by just clicking Calculate.
After you're done with all the changes click on Reschedule/Refinance.
The previous loan account will then be closed and be replaced by the new one.

Please be Aware
If you are rescheduling into the same loan product of the original account, the rescheduled / refinanced loan will need to comply with the currently applicable loan product rules. If the original loan parameters differ from the current loan product settings (for example, the interest rate that the loan had before is higher than currently applicable), you will receive an error message and won't be able to reschedule/ refinance.
Please be Aware
When a new loan account is created at rescheduling / refinancing, the old loan account's custom fields are copied to the new loan account. This is the equivalent of adding those custom fields to account, and therefore the user performing the reschedule/ refinance operation must have permission to edit all the applicable custom fields .

Undoing a Reschedule / Refinance

If you rescheduled or refinanced a loan under wrong loan terms or by accident, you can undo this action.

To do so open the Rescheduled Account  > click on More > Undo Reschedule / Refinance.

Mambu will reactivate the original account and change the status of the new one to Closed (Withdrawn) .

For audit purposes, the Transfer transactions are kept on both accounts, but these transactions will be reversed.


Ask the Mambu Community

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.

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