Interest Detail

The Interest Detail section of the Financial Detail form displays all the current settings for calculating interest on the debtor's account. It also holds any original interest or judgment interest amounts. The Interest Detail has many different fields, depending on the type of interest you choose. You can simply record Original Interest and note that there is No Additional Interest or you can give Collect! the information needed to calculate any standard type of interest.

Financial Detail

Each type of interest requires different information and is calculated in a particular way according to industry standards. Since this can get quite complicated, topics are available to explain each type of interest.

To access this form, select the Principal field on the Debtor form. This will display the Financial Detail form. Select the Interest tab.

Original Interest

This is the amount of the interest already charged on the account at the time the account was listed with you. The amount is added to the debtor's owing. It is included in the amount of Total Interest displayed in the Interest Detail for this debtor. This field is ignored if you have entered a judgment against the debtor.

Interest Type

This field allows you to choose the type of interest on the account. The possible selections are listed below.

No Additional Interest

Select No Additional Interest if you do not want Collect! to calculate interest on this account.

Simple Interest

When you set this switch Collect! calculates Simple interest. You must also enter an Annual interest rate and a Calculate interest from date. You can choose a 360, 364 or 365 day calculation year.

Notice that the Reset Interest form is accessible from this setting.

Compound Interest

When you set this switch Collect! calculates Compound interest on this account.

Compound interest calculations are far more detailed and Collect! allows you to enter all necessary information by displaying additional fields on the Interest Detail form.

Options include:

* Revolving Compound Interest

* 360, 364 or 365 days or Ordinary

* Amortized Loan - Normal or Rule of 78's

When you use Compound Interest, you MUST post the Original Principal amount as a Transaction (Type 196). Any Principal amount entered into Original Principal directly is overwritten as Collect! uses the total of all Principal transactions to arrive at the Original Principal.

Compound interest calculations produce a running balance of principal, interest, fees and adjustments. You MUST use Payment Breakdown transaction types for posting any payments to an account with Compound Interest switched ON. Please see the Help topic Transaction Type for more information and look for the section on Payment Breakdown.

Variable Interest

When you select Variable Interest, Collect! reads the Interest Rates and Start Dates from the interest CSV chosen for this account's client through the Client Settings form.

You must have already created an interest rate table CSV and placed it in the Collect\bin\vinterest folder.

Please refer to Help topic, How to Use Variable Interest for details.

Variable Interest is a licensed extension module.

Compound Type

When Compound Interest is selected on an account, this field presents you with the option to select one of three types of Compound Interest listed below.

Revolving Compound Interest

When you choose Compound Interest and switch on Revolving compound interest, the Period field becomes visible. Refer to subheading Period below for details. Other fields have been described above.

This switch causes Collect! to calculate compound interest on a revolving basis.

Please enter an Annual interest rate. For instance, enter 15 for 15%.

Choose a Period. This is the frequency for compounding interest and converting it to principal.

Enter a 'Calculate interest from' date. If this is left blank, Collect! will use the debtor's Listed Date unless there is an earlier Charged Date. Setting this switch disables the calculations supporting term payments.

When you use Compound Interest, you MUST post the Original Principal amount as a Transaction (Type 196). Any Principal amount entered into Original Principal directly is overwritten as Collect! uses the total of all Principal transactions to arrive at the Original Principal.

Compound interest calculations produce a running balance of principal, interest, fees and adjustments. You MUST use Payment Breakdown transaction types for posting any payments to an account with Compound Interest switched ON. Please see the Help topic Transaction Type for more information and look for the section on Payment Breakdown.

Amortized Loan - Rule Of 78

See Help topic How to Use the Rule of 78 Interest for details of this type of Amortized loan calculation. To display information relating to fixed term loans, select of the Amortized loan radio buttons.

Amortized Loan - Normal

See Help topic How to Use Amortized Loan - Normal Interest for details of this type of Amortized loan calculation. To display information relating to fixed term loans, select of the Amortized loan radio buttons.

Annual Interest Rate

This is the Annual percent rate at which the account is charged interest. This rate is divided into appropriate periods for the interest calculations. This rate is used to calculate the periodic interest rate and the equivalent daily rate.

For example, when using a Monthly period, there are 12 periods per year, so the periodic rate is the Annual interest rate divided by 12. Similarly, when using the Biweekly period, the number of periods in a year is 26. The periodic rate is therefore the Annual interest rate divided by 26. The periodic rate is used to calculate interest payable over a period.

After entering a rate in this field, other details update automatically when you tab out of the field.

This field is hidden if you are using Variable Interest.

Period

This is the frequency for compounding interest and converting it to principal. For Amortized loans, this field also determines the frequency of payments due on this account. This field is set to MONTHLY and READ ONLY for Amortized loans.

This field is hidden if you are using Variable Interest.

Rate Basis

When Compound Interest is selected, this field allows you to select a Rate Basis. This is the number of days Collect! will consider to occur in a year. Depending on local laws and/or contractual requirements, you can select from one of the options listed below.

365 Days

Interest is calculated on a 365 day year.

364 Days

Interest is calculated on a year of 7 days and 52 weeks, which totals 364 days. This is used when you need weekly compounding on daily interest. It results in 52 equal 7 day periods.

360 Days

Interest is calculated on a 360 day year.

Ordinary

Interest is calculated on a 12 month year without considering number of days.

Calculate Interest From Date

In Simple and Revolving Compound Interest calculations, this is the date from which interest will be calculated. It is normally the Start Date for the loan. Collect! will automatically use the debtor's Listed Date as the calculation start date, unless there is an earlier Charged Date on the account.

You can adjust the 'Calculate interest from date' as needed, just make sure that if you have an Original Principal 196 Transaction on the account, the Payment Date is not LATER than the date you want to start calculating interest.

WARNING: When you enter a Judgment Date in the Financial Detail form, the 'Calculate interest from date' automatically changes to the Judgment Date and previously accrued interest is erased. If you wish to preserve a record of any interest accrued prior to Judgment, please refer below to the section heading Reset Interest BEFORE entering the Judgment Principal and Judgment Date.

For Amortized Loans, interest is calculated from this date when 'Delay Payment' is switched ON. When 'Delay Payment' is switched OFF, this field is ignored.

This date is actually related to the payment and posted date of the principal transaction(s) related to this debtor's owing. You could post a loan in January and not start interest calculations until March, simply by working the transaction posting vs. interest calculation dates.

See Total Term Calculations below.

This field is hidden if you are using Variable Interest.

Variable Interest File

This field is only used when you are using the Variable Interest extension module. Enter the exact name of the file containing your interest rates table. A file name entered here will supercede the file name entered at the client level.

Payment Period

Select a frequency for compounding interest and converting it to principal. For Amortized loans, this field also sets the frequency of payments due on this account. This field is set to MONTHLY and READ ONLY for Amortized loans.

Enter a Payment Period and Payment Amount and then create a Promise. The "Repeat" and "Amount" will populate automatically.

Payment Amount

When you are using No Interest, Simple Interest or Compound Interest -- Revolving Compound Interest, use this field to type in an amount you want the debtor to pay on a term basis. You must also create a Promise Contact and set the Repeat Period. Then Collect! can automatically manage the promise payments, underpayments and overpayments. Please refer to How To Manage Contacts for details.

Enter a Payment Period and Payment Amount and then create a Promise. The "Repeat" and "Amount" will populate automatically.

When you are using Compound Interest -- Amortized Loan, this is the amount of the payment for a term loan. It is calculated from the information entered in the Interest Detail form. This field is read only unless you set terms manually.

You can manually enter a Payment Amount if you switch ON 'Set Terms Manually'. This is only an option when you are using Amortized - rule of 78.

See Total Term Calculations below.

First Payment Date

You can optionally delay the date of the first payment for a Amortized loan.

From the date one period before the First Payment Date, the loan is calculated according to the term and interest rate defined.

The amortization schedule is calculated using the original principal plus the accrued interest compounded daily on the original loan amount from the date one period before the specified First Payment Date.

Normally, the system expects the First Payment Date to be one period after the Calculate Interest From Date.

See Total Term Calculations below.

Total Plan Payments

This is the total principal and interest that will have been paid upon completion of all payments in an orderly manner.

Accrued Interest

This is the amount of unposted interest that has accrued on this account. When you reset the interest to post a 499 transaction, this field resets to zero and will display the new accrued amount until posted.

If no interest is calculated, then this field displays zero. In the case of Revolving Compound interest, this represents the amount of interest that will be paid when the next payment is made. In the case of a Amortized Loan, this is the amount of interest currently due, based on the Rule of 78's and the date of the most recent payment.

The Accrued Interest field shows the outstanding interest on this account, while the debtor's Interest field and the Total Interest field in the Interest Details reflect the Original Interest plus all the Accrued Interest that has accumulated over the time that interest is being calculated on this account.

When there is a Judgment, all interest is calculated from the Judgment Date and prior activity on the account is ignored. Please refer to the section heading Reset Interest for more details.

Early Payoff Savings

Early payoff savings is the amount the debtor will save in uncharged interest if the account is paid in full on the current date. This calculation uses the Rule of 78's based on the loan term.

In the case of a term account with a delayed first payment, interest is calculated for the term, and then the rule of 78's is applied over the reduced term when the first delayed payment is made. In other words, a 36 month term loan where the 1st payment is delayed for three months uses the rule of 78's, based on 34 actual payment terms.

Early Payoff Amount

This is the amount the debtor would need to pay to completely pay the loan off before the current period end.

Term

This is the term of the loan. This field is visible only for all interest types. Its primary use is for Amortized Interest loans.

*** CBR Reporting: This field is visible for all interest types in case you are reporting to the credit bureau as a Credit Grantor. If you are a credit grantor reporting an installment loan, you must fill in this field. The value should be the number of months for a loan or the number of years for a mortgage.

Examples of Term:

A 2-year loan with a Monthly period, that is, monthly payments, has a Term of 24.

See Total Term Calculations below.

TOTAL TERM CALCULATIONS

We calculate the total term payments using the Calculate interest from date and standard amortization equations. From there we calculate a periodic payment amount based on the number of periods in the total payment schedule (factoring in a First payment date, if entered) and then the total plan payments are calculated by multiplying the periodic payment amount by the number of payments. This takes care of rounding details to give accurate total payments.

Please refer to help topics on the different types of interest.

Set Terms Manually

This switch is visible only when Amortized Loan - Rule of 78 is selected. When this is switched ON, you can enter a value in the Payment Amount field. When it is switched OFF, the Payment Amount field is read only and Collect! calculates the amount based on your other settings.

Turn this switch ON (check mark) to manually enter the Payment Amount. When it is switched OFF, the Payment Amount field is read only and cannot be modified.

Collect! uses the Payment Amount to calculate the total payments over the Term (minus any periods delayed for first payment). From this, Collect! then derive the Total Interest Amount.

The Total Interest Amount is used when posting payments to determine the amount of interest due in the current period when the Transaction Type specifies a Payment breakdown.

Late Fees Apply

Interest Detail form with Late Fees Apply

Check this box to enable Late fee details.

Late fee information currently is for informational purposes only, and is not used for automation.

This will be developed further as time permits.

In reality, Collect! compounds interest on a periodic basis. Missed payments simply cause the accrued interest to increase, such that when the next payment is made, more interest is deducted than would have been if the payment had been made within the scheduled period.

What legal implications this has, we do not know! Please review our legal disclaimers before using interest calculation functions.

Grace Period Days

This is the number of days allowed from the payment due date before a late charge is applied.

Lesser Of

The late fee will be calculated as the lower of either the entered amount or the percent of the payment.

If you have entered only the percent, Collect! will calculate only the one value. If both the percent and entered dollar amount have been entered, Collect! will apply the lower value.

Greater Of

The late fee will be calculated as the greater of either the entered amount or percent of the payment.

If you have entered only the percent, Collect! will calculate only the one value. If both the percent and entered dollar amount have been entered, Collect! will apply the higher value.

Late Fee Amount

This is the late fee amount.

Late Fee Percent

This is the percent of the scheduled payment that is calculated as a late fee.

Amortize With Effective Rate

This field is displayed only when Normal Amortization is selected as the interest mode. It is currently OFF by default.

When it is enabled and the rate basis is set to anything other than 'Ordinary', the payment amount and total plan payments are recalculated based on the effective interest rate.

The effective interest rate is not the same as the the nominal rate that is displayed on the interest form. It is calculated automatically to compensate for the fact that the total plan payments is calculated using a monthly rate and the accrued interest breakdown is calculated using a daily rate.

When 'Ordinary' is selected as the rate basis, the total plan payments is calculated normally using the nominal rate but the accrued interest on the payment breakdown is now calculated using a monthly rate.

With the 'Amortize with effective rate' turned on, the PAYMENT AMOUNT x TERM = TOTAL PLAN PAYMENTS

With the switch turned off it falls back to the previous behavior of having extra principal left over after completing all the scheduled payments.

Additionally, the per payment interest breakdown now uses the simple interest formula instead of the compound interest formula to determine the interest accrued in a month which is how it should have originally worked.

Apply Charges Last

This field is only visible when amortized interest is selected. Historically, all outstanding fees were removed from the total paid for the period prior to being applied to the interest and principal. If this switch is turned on, the outstanding fees are no longer removed from the payment. This will result in an outstanding balance at the end of the term equal to the total charges that have accrued over the life of the term.

Compound Unpaid Interest

Turn this switch ON (check mark) to add unpaid interest to the next month's Principal when a payment is missed. This switch applies only to Amortized Loan - Normal.

Amortization

This button is only active when using Amortized Interest. When you select the Amortization Schedule button, the Amortization Table Summary is displayed with all scheduled payment details based on your settings.

Reset Interest

This button is visible only when using Simple or Revolving Compound Interest. Select Reset Interest to change the dates and interest rate used in interest calculations for this account. Collect! prompts you to capture the interest accrued to stop date as a transaction of Type 499. Then you can enter a new interest rate, if necessary, and a new date to restart interest calculations. This is useful for recording interest accrued prior to Judgment, but you must do it BEFORE putting in your Judgment Principal and Judgment Date! Please see the Help topic Reset Interest for more details.

Calculate Delinquency Date

This field is in effect only when 'Report as credit grantor' is switched ON in the Company Details form.

When this is switched ON, Collect! will calculate the Delinquency Date in the following manner. If there is a promise that is at least 31 days past due, Collect! will calculate the Delinquency Date as the Promise Date plus 31 days.

If this is not switched ON, Collect! will not calculate the Delinquency Date.

FOR CBR: When this switch is ON for Credit Grantors and Collect! calculates the Delinquency Date, the Status Code in the Credit Bureau Detail tab will update accordingly to show the correct "Days past due" for amortized interest accounts.

Amortized Loan Requirements

1. Please enter an Annual interest rate. Collect! will divide this rate appropriately when you choose a Period.

2. Choose a frequency Period for compounding interest and scheduling debtor payments.

3. Enter a Term. This is the total number of payments. For instance, a 4-year loan paid monthly has a Term of 48.

4. Enter a Calculate interest from date. If this is left blank, Collect! will use the debtor's Listed Date, unless there is an earlier Charged Date.

5. Optionally, you can define a First Payment Date. Interest is accrued on a daily basis from the date of the loan (Calculate interest from date) to the date one period before the First Payment Date.

Promises With Interest Details

When you are entering Interest Details for an account, you can set up a Payment Period and a Payment Amount in the Interest Detail form. Then, when you create a Promise Contact, Collect! will automatically fill the Repeat value and the Amount on the Promise to match the values you entered in the Interest Detail form.

Interest Topics:

- Amortized Loan - Normal
- Rule of 78's
- Revolving Compound Interest
- Simple Interest
- How To Make An Interest Adjustment
- How To Setup Amortized Interest
- How To Use The Amortization Schedule