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# Loan Products

Constructor for loan products including interest rates, maturities, amounts, etc...

## Create a new Loan Product

To create a new Loan product click Create button on the upper right-hand corner and fill the following fields:

• Name - specify the name of a new loan product
• Code - specify a short unique code for designation this new product. For example, it can contain capital letters of the product.
• Availability - set the availability of the product by checking the boxes you need: Person, Company, Group
• Schedule type - select the schedule type you need from the drop-down list
• Currency - select the currency code from the drop-down list
• Interest rate - set minimum and maximum value for the yearly interest rate of loan product
• Amount - set minimum and the maximum amounts allowed for the loan product
• Maturity - set minimum and maximum tenor, in periods, for the loan product
• Grace period - set minimum and the maximum number of periods during which only interest payments will be collected, but not principal repayments. This function can also be used for setting up products with end-of-term (bullet) repayment. When the grace period is over, the principal of the loan will start to be collected.
• Has payees - check the box has payees if required. Payees are individuals or entities receiving the loan on behalf of the client.
• Entry fees - select required entry fee from the drop-down list
• Top up allow - top-up allows increasing the amount of the initially approved loan up to a certain value. Check the box top up allow to set the top up limit and top up olb
• Top up max limit - set the maximum limit for the top up (based on disbursed amount)
• Top up max olb - set maximum olb amount for the top up (based on the outstanding balance)

Select Accounts from the drop-down lists:

• Principal - set account used for the Principal for the loan product
• Interest accrual - set Interest accrual account for the loan product
• Interest income - set Interest income account for the loan product
• Penalty accrual - set Penalty accrual account for the loan product
• Penalty income - set Penalty income account for the loan product
• Write off portfolio - set Write off portfolio account for the loan product
• Write off interest - set Write off interest account for the loan product
• Write off penalty - set Write off penalty account for the loan product

Please note that every field is required. Make sure that you select the right accounts as otherwise, accounting transactions related to this product will not be correct.

After that, click the Save button at the upper right-hand corner to save the new entry or Cancel to discard your changes.

## Edit Loan Product

Click on the entry you want to edit to go the entry details where you will find the Edit button.

Once changes made click Save to save them or Cancel to discard.

## Schedule types

### Annuity schedule

An annuity is a series of payments made at equal intervals. There are seven annuity schedules available:

1. ANNUITY_BIWEEKLY - the period is two weeks
2. ANNUITY_MONTHLY - the period is one month, 360 days in the year
3. ANNUITY_MONTHLY_FACT - the period is one month, the actual number of days in the year (365 or 366)
4. ANNUITY_QUARTERLY - the period is three months, 360 days in the year
5. ANNUITY_QUARTERLY_FACT - the period is three months, the actual number of days in the year (365 or 366)
6. ANNUITY_SEMIANNUALLY - the period is six months, 360 days in the year
7. ANNUITY_SEMIANNUALLY_FACT - the period is six months, the actual number of days in the year (365 or 366)

All of them have the same rule of interest accrual so let's look at ANNUITY_MONTHLY for example:

Example:

Let's say we have the loan amount 100 000 USD with interest 12% for 12 months. Here is an algorithm of calculating stream of payments:

We have to find the annuity coefficient which is calculated by the following formula  $P = \frac{S*I_p}{1-(1 + I_p)^{-T}}$

where is an interest rate for the period, e.g. dividing yearly interest rate for a number of periods in the year and T is a number of months in the loan maturity.

In our case, period interest rate is 12% / 12 = 1% and T = 12 months. So the annuity coefficient is  $\frac{100000*0.01}{1-(1+0.01)^{-12}}=8884.88$

So we found our total amount and it will remain the same for the following payments but principal and interest will change.

The next payment is calculated absolutely the same but with different loan amount (OLB) because it was reduced after the first payment.

Other types of annuity schedule differ only in period interest rate because there will be more or less than 12 payment periods in the year.

### Differential types

Principal divided on a number of periods in the year and paid only at the end of each period (3 or 6 months) and interest paid every month. Interest is calculated as the interest rate for the period (e.g. yearly rate divided on 12) multiplied on OLB.

1. DIFFERENTIAL_QUARTERLY - principal paid once in three months, for example, a loan amount is 100 000 USD and maturity is 12 months. Then every three months you will pay 25 000 USD plus interest.
2. DIFFERENTIAL_SEMI_ANNUAL - principal paid once in six months

### Fixed types

Principal divided on a number of periods in the year and paid at the end of each period as well as interest. Interest is calculated as the interest rate for the period (e.g. yearly rate divided on 12) multiplied on OLB.

1. FIXED_PRINCIPAL_BIWEEKLY
2. FIXED_PRINCIPAL_MONTHLY
3. FIXED_PRINCIPAL_QUARTERLY
4. FIXED_PRINCIPAL_SEMIANNUAL_QUARTERLY
5. FIXED_PRINCIPAL_BY_SIX_MONTH

### Flat types

Principal divided on a number of periods in the year and paid at the end of each period as well as interest. Interest is calculated as the interest rate for the period (e.g. yearly rate divided on 12) multiplied on an initial loan amount.

1. FLAT_BIWEEKLY
2. FLAT_MONTHLY
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