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The first step is to establish the Loan Master as usual. If the loan is to accrue no interest during the deferred period, select Amortized as the interest calculation method. By doing this, the first payment posted will allocate interest based on only one payment cycle, usually one month. If interest is to accrue and be paid when payments begin, select Daily interest. If Daily interest is chosen, be prepared to see a large portion of the first payment going to interest, as the program will collect interest from the disbursement activity date until the activity date of the first payment.
NOTE: If closing documents indicate daily interest, but that interest is not to accrue, select Amortized as the interest method until the first payment is posted. After that payment is posted, edit the Loan Master to Daily interest. Any future payments will then calculate interest from activity date to activity date.
Within the Loan Master there is field titled “First Due Date”. This is the field in which the date the first payment is actually due is entered. Delinquency reports and several pertinent features and supplements will take this date into consideration when determining if a loan payment is late. It will not be considered late until the First Due Date has passed.
There is a pre-established status code for Deferred loans. Although choosing the appropriate status code for each Loan Master is always your option, consider using the Deferred code. By doing this, those loans can be excluded from statistical reports if desired.
Another option is to establish an Optional Master Field to hold the date interest and/or principal payments are to begin. This can be utilized to create “tickler files” to assist staff in monitoring deferred loans. The date entered within the Optional Field can be accessed by utilizing Master File Query or Quick Date Listings.
Also, when posting the Disbursement in the Loan Activity screen, be sure the Next Payment Due field reflects the date you expect to receive the first payment. If you should save the transaction without advancing this date, you may go to Tools, Build History and correct the Next Payment Due Date there.
Should you need to change a loan to Deferred Status after Repayments have been received, there may be some transactions you will need to enter depending upon how your loans are set up. Please follow the steps below that apply to your loans.
If your loans are set up in the Loan Master as Amortized, you will not need to make special entries in the Loan Activity screen. However, you may want to advance their Next Payment Due Date so they will not appear as Delinquent on any reports, nor have Late Fees collected when they resume payments. To advance the Next Payment Due Date, select Tools, followed by Build History. Enter the Loan Number. You will receive a pop-up message that you can only change the Paid Thru Date, Next Payment Due Date, or Notes. Click OK on this message. Your cursor will be in the Paid Thru Date field. Advance your cursor to the Next Payment Due Date and edit this date to be the date you expect to begin receiving payments. Enter a notation in the Notes section that you have advanced the date and also note what the original date was and Save this entry. Change the Loan Status in the Loan Master to be Deferred, especially if you are using our Credit Bureau Reporting supplement. The Deferred Status Date in the Loan Master should be the date the first payment is due in order for the loan to be accurately reported to the Credit Bureau. Repeat the above for all loans that will be Deferred. When the Deferment period ends, you will want to return to Tools/Build History to edit the Next Payment Due field. The date you will want to enter will be the original Next Payment Due Date advanced by the number of months of the deferral. You will probably need to do this editing for only the loans that were past due at the time of deferral.
Daily Interest Loans:
If your Daily Interest Loan will continue to accrue interest at the same rate during the period of no payments, follow the steps above for Amortized Loans. All interest will be collected when the client resumes payments.
If your Daily Interest Loan will stop accruing interest during the deferral period, you will need to make entries in the Loan Activity screen in addition to changing the Loan Status of your loan to Deferred. Please remember, all entries need to be entered in chronological order so do not make entries in advance of your current calendar date just in case your client makes a payment early or some other entry is necessary. On the date the deferral begins, go to Loan Activity, click New. Enter your Loan Number. Activity Date will be the start date of the deferral. Activity type is Repayment. Enter $0 for Activity Total. Tap enter or click to the Paid Thru Date. You should see a positive dollar amount appear in Accrued Interest. This is interest that is due to you from the date of their last activity thru the deferral date and will be collected once repayments resume. If any other fees appear on the Loan Activity screen, be certain to remove them as this entry should only accrue interest. The Paid Thru Date to be entered will be the same as their last Paid Thru Date (looking at the lower left corner of your screen will show you this date). Next Payment Due Date is the date in which the client is expected to resume payments. Enter a Note stating that you are accruing interest up to the deferral date along with the original Next Pay Due Date. Save the activity.
Next, go to the Loan Master file and change the Interest Rate to be 0%. Also, change the Loan Status to Deferred and the Status Date to be the date payments are scheduled to resume.
When the deferral period ends, go to Loan Activity. Click Adjustment in the lower right corner. Enter your Loan Number. Activity Date will be the date the deferral period ends. Repayment is Activity Type. Again enter $0 for Activity Total. Paid Thru Date will remain the same as the previous activity. Next Payment Due will be the date their first payment after the Deferral period is due. If the loan was delinquent at the time they were placed in Deferred status, you will want to use their Next Payment Due date from that time and advance it by the number of months of the deferral. This will assure correct reporting and collection of any late fees now due on new payments. Make a Note that deferral period has ended. Save the activity. This entire activity should not have dollar amounts appear in any field other than New Balance. This entry is being done to set the dates as to when interest accrual resumes and late fee collection is to begin. This step is very important to do.
Return to Loan Master and reenter the Interest Rate. Be sure to change the Loan Status and Status Date back to what they were before the Deferment period or to whatever Status currently applies.
Interest will now begin accruing again from the end of the deferral date. Your first activity, or possibly several activities, will show a negative amount in Accrued Interest. Do not remove this amount as the interest that was accrued before the deferral period is now being collected.