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.
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
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.