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Consulting Plus Inc.,
29222 Rancho Viejo Road, Suite 209 San Juan Capistrano, CA. 92675 (800)481-2708


Typical Question:

What is the meaning of interest due and principal due


Loans are generally expected to be amortized over a predetermined period of time usually stated in months or years. It is a common practice to print an amortization schedule that illustrates the dates and amounts of each expected payment. Loan payments are rarely paid when expected. One of the primary purposes of a loan accounting system is to calculate the interest due as of the actual payment date rather than the expected date.

For each loan, every day a payment is due, the program computes the interest due and the "scheduled" balance assuming the payment was made on the date due. The scheduled balance is the balance an amortization schedule would show for this payment date. This calculation is done and the results stored so the program can compare the real current status of the loan with what it should be if all payments had been made on time. The results of this comparison are used to calculate the amount of interest and principal required to bring the loan current. If the loan is past due, both these numbers will be positive. If the loan is prepaid, the principal figure calculated will be negative, indicating that more principal has been paid than was required.


It is crucial to understand that this scheduled balance is only accurate if the system has an accurate starting point. For new loans added to the system after installation, the 'accurate' starting point is the original amount of the loan. For existing loans entered into a new system, the starting point must be provided by the operator during the initial data entry. If the scheduled balance is not entered correctly for existing loans, the system will never be able to accurately determine if the loan is delinquent, current, or prepaid.

Interest Due (Unpaid)

This is the amount of interest due and unpaid. Every payment date, the entire amount of interest in the accrued interest field is moved into this field. Note that it is moved, not added.

The program assumes that at each payment date, all interest is due.

Each time an interest payment is posted, the payment amount is subtracted from this field. If the borrower pays more interest than necessary, the interest due amount will be negative.

Principal Due

This is the amount of principal required to bring the current balance in line with the originally scheduled repayment plan. A negative number indicates the loan is prepaid.

If this amount is positive, a payment has matured and not yet been paid. A positive amount will also occur if interest is calculated on the actual day basis using a 360 divisor. This basis accrues 1.39% more interest than the monthly interest method. This extra interest will cause each principal payment to be slightly less then the scheduled principal payment.

Each day a payment is due, the system calculates the interest due then subtracts this amount from the payment amount due. The difference is the amount of interest due on this payment. This amount is added to the prior interest due amount.

Each time a principal payment is posted, the principal payment amount is subtracted from the principal due amount. When the borrower pays more principal than necessary, the principal due amount will be negative.

Interest Accrued

This is the amount of interest which has accrued on the loan and which has not yet been paid. This amount may or may not be 'due'.

Every update computes the interest due since the date of the last update and adds it to this amount. This happens every day.

This calculation is affected by the settings of  BASIS.

When an interest payment is posted, this amount is reduced by the amount of the interest payment. If the borrower pays more interest than has accrued, this amount will be negative.



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