Configuring an Equal Installment Interest-Only Loan

To set up a product with equal interest-only installments, select Product Type: Interest Only Equal Installments Loan.

For more information, see Setting Up New Loan Products.

This loan type has the following settings that should be configured:

Interest Rate section

• Accrue Late Interest: This toggle allows or disallows the accrual of interest on amounts that are in arrears. This option should be enabled for interest to accrue on amounts that are in arrears.
  • When true (enabled), the interest computation after a late installment takes into consideration the outstanding closing balance.
  • When false (disabled), interest will always be calculated on the expected closing balance regardless if there are late installments on the schedule.
• Allow Adjustable Interest Rates: An Adjustable Interest Rate Loan, also known as a variable rate loan, is a type of loan where the interest rate applied varies over time. The rate changes are typically tied to a specific benchmark or index, which reflects prevailing market rates.
  Mambu supports interest-only loans with configurable adjustable interest rates. These rates can be set as fixed, indexed, or a combination of both.
• PMT Adjustment Threshold: The payment due (also called total due) adjustment threshold determines whether the total due of the current installment is adjusted after an interest rate change or an overpayment. If the time interval between the interest rate change and the due installment is greater than the specified threshold, the total due is recalculated to reflect the new interest rate. Otherwise, the total due remains unchanged.
  • The threshold days method can be configured as calendar days or working days count.
    

Repayment Scheduling section

• Payment Interval Method: Supports the options to pay with either Interval or Fixed Days of Month.
  The current product does not support a grace period or other rounding options except for rounding of the repayment currency.

Repayment Collection section

• Pre-Payments Acceptance: If the product accepts pre-payments as a pre-payment recalculation method, the amount per installment is reduced.
  • For more information, see Equal Installment Interest-Only Loans
• Allow Custom Repayment Allocation: For more information, see Processing Loan Repayments.

Arrears settings

For more information, see Arrears Settings.

Non-configurable settings

This product type has some default settings that cannot be changed. They are visible but non-editable in the loan product create and edit forms:

• Interest type: Simple interest
• Calculate interest using: Principal and Interest
• Prepayment allocation: On upcoming pending installment only
• Prepayment recalculation method: Reduce Amount per Installment
• Apply interest on prepayment: Manual
• Accrued interest posting frequency: On repayment
• Payment allocation method: Horizontal