Interest Bearing Loans
Overview document (not a LeasePak menu item)
Corresponding End of Period process: None
IBL overview document in progress. Currently includes the documentation for IBL Interest Accrual After Maturity, the feature in which 'B' method IBLs continue to accrue interest on unpaid principal after the maturity date.
IBL Features
Interest Accrual After Maturity
'B' Method IBLs Only
Vehicle Finance users: This feature does not work in conjunction with the Vehicle Finance module.
This feature enables 'B' method IBLs to continue to accrue interest on unpaid principal after maturity.
Requirements
An IBL must meet the following requirements in order for LeasePak to continue to accrue interest after maturity:
- Be a 'B' method IBL (accrual methods _AF_, _AX_, _IF_, and _IX_ only).
- Be in 'NMAT' normal matured status.
- Have an unpaid, outstanding principal balance.
- Not have frequency 'SKIP' or 'ADV_' as the last stream in the payment schedule.
- Not have a taxable asset (LeasePak will strictly enforce this starting version 6.0a).
Process Overview
- When a 'B' method IBL with an unpaid, outstanding principal balance reaches maturity (status 'NMAT'), LeasePak continues to accrue interest using the same cycle as when the lease was active, so long as the IBL does not have a payment frequency of 'SKIP' or 'ADV_' as its final payment stream and does not have a taxable asset.
- LeasePak does not create any new invoices after maturity; instead, each subsequent accrual updates the interest billed (but not the invoice due date) on the final invoice.
- Because the due date on the final invoice does not change, LeasePak continues to use this date for delinquency calculations and reporting.
- Regardless of how the Portfolio [U0212]: Miscellaneous Customizations switch Prorate Inc, IDC/IDR, Depr is set, LeasePak does not prorate interest accrued after maturity.
Accruals
With each accrual cycle, LeasePak accrues interest on the IBL according to the accrual method, deferral setup, form code, and other parameters governing the loan. LeasePak does not create any new invoices; instead, it continues to update the interest billed on the final invoice. While the accrued-to date advances with each cycle, the due date of the final invoice remains the same. For example:
- A loan with an arrears accrual method and a monthly payment schedule has a maturity date of 2/15/ and an accrual deferral days of 0.
- On 1/15/, LeasePak accrues interest for the period of 1/16/ to 2/15/, advances the accrued-to date to 2/15/, and creates a final invoice with a due date of 2/15/. At this point the loan matures, moving into an 'NMAT' status.
- As long as the outstanding principal balance of the loan remains unpaid, on 2/15/ LeasePak accrues interest for the period of 2/16/ to 3/15/, advances the accrued-to date to 3/15/, and places the interest on the 2/15/ invoice. The 2/15/ invoice remains with its original due date, but now includes 2 months of interest.
Accrual Reversals
Once LeasePak has started to accrue interest on an IBL after maturity, you cannot reverse accruals if you have performed either of the following:
- A partial interest payment on the final invoice where the interest paid is greater that a single month's interest accrued.
- A payment on the final invoice where the payment effective date is greater than the final invoice due date.
Payment Effective Dates
Using the sample loan from above, the following illustrate when and how LeasePak calculates partial interest based on the payment effective date of a mature (status 'NMAT') loan:
- Scenario 1: on 1/15/, LeasePak accrues the final invoice, due date 2/15/. You make a payment with an effective date of 1/25/. LeasePak recalculates the interest, using a partial period of 1/16/ to 1/25/.
- Scenario 2: on on 1/15/, LeasePak accrues the final invoice, due date 2/15/. You make a payment with an effective date of 2/25/, a date after the current accrued-to date. LeasePak does not calculate interest for the partial period of 2/16/ to 2/25/.
- Scenario 3: on 2/15/, LeasePak accrues another month's interest, advances the accrued-to date to 3/15/, and adds the interest to the final invoice, still due date 2/15/. You make a payment with an effective date of 2/25/. LeasePak recalculates the interest, using a partial period of 2/16/ to 2/25/.
- Scenario 4: on 2/15/, LeasePak accrues another month's interest, advances the accrued-to date to 3/15/, and adds the interest to the final invoice, still due date 2/15/. You make a payment with an effective date of 3/25/, a date after the current accrued-to date. Again, LeasePak does not calculate interest for the partial period of 3/16/ to 3/25/.
These scenarios illustrate that after a loan's maturity, whether or not LeasePak calculates partial interest based on a payment effective date depends on whether or not LeasePak has accrued interest for the period in which the payment effective date falls. However, during payoff or termination, LeasePak will assess any partial interest due as part of the payoff/termination amount (see the Payoffs and Terminations section below).
Payment Extensions
If you perform a Payment Extension [U0107] on a mature loan, LeasePak moves the final invoice due date out by the number of months extended, along with any after-maturity interest on the invoice, but without performing any additional accruals at the time of the extension. For example, LeasePak has accrued on 2/15/ and 3/15/ interest for the final invoice with the due date 2/15/. The invoice now includes 3 months of interest. If on 3/25/ you extend the loan payments by one month, the final invoice due date becomes 3/15/. LeasePak moves the invoice one month without performing additional accruals or changing the accrued dates of the interest already accrued. The invoice still includes 3 months of interest, but now with two accrued prior to the new invoice due date and one accrued after.
If you reverse the payment extension, LeasePak resets the invoice due date, again leaving the interest accrued dates and amounts in place.
Preauthorized Payments (PAP/ACH)
For loans after maturity, LeasePak still uses current behavior--that is, the invoice due date is still the criteria for when to make a PAP/ACH payment. But when LeasePak creates the batch payment file, it uses the accrued-to date as the payment effective date. Using the sample loan from above (without the payment extension), if LeasePak has accrued interest through 3/15/, the payment effective date is 3/15/, not 2/15/.
Suspended Earnings
If LeasePak has already accrued interest on the loan after maturity, and you move the loan from an 'NMAT' status to a suspended status using Suspended Earnings [U0115], LeasePak reverses the interest back to the maturity date, but does not move the reversed interest to Suspended Earnings general ledger accounts. LeasePak stops the loan at its maturity date for the duration of the suspension. If you move the loan back to an 'NMAT' status, however, LeasePak re-accrues the previously reversed interest, as well as accruing any additional interest that would have otherwise accrued during the suspended period.
Payoffs and Terminations
Lease-Level Payoff/Termination Only
'A' method IBLs: LeasePak allows you to set the payoff/termination effective date after the maturity date, calculating any additional interest owed based on the effective date.
For the payoff/termination amount, LeasePak calculates any additional interest owed based on the payoff/termination effective date. If you reverse the payoff or termination at a later date, LeasePak accrues any interest that would have otherwise accrued during the period in which the loan was paid off or terminated.
LeasePak Documentation Suite
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