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For a number of reasons, the interest rate used when a Loan Master file is established with GMS-RLSS may change. Whether it goes up or down, tracking that rate and posting activity correctly can easily be handled. In order for variable interest rate loans to calculate properly, they should be established as Daily interest within the Loan Master file. If you have loans set as Amortized and need to change the interest rate, edit the Loan Master file to Daily interest on a temporary basis (see NOTE below).
First of all, if you know in advance when the rate will change, you may want to establish an optional field containing the date of the scheduled change. You can then use this optional field to help create a “tickler file” to remind you when rates are due to change. The data within this optional field may be accessed through Master File Query and Quick Date Listings.
Once you know the exact date the rate will change, there are two steps required. This process can be repeated whenever necessary.
IMPORTANT NOTE: If the loan was established as Amortized and you have changed it to Daily to handle the above steps, you should leave the Loan Master file at Daily until the next repayment is posted. This allows the program to properly calculate interest from the date of the rate change until the date of the repayment; interest from the last payment until the rate change is now “accrued” interest. Once that payment is recorded, you may edit the Loan Master file back to Amortized if desired.
The Automatic Rate Change feature can accomplish the above steps automatically. If this feature is used, the payment amount within the Loan Master file will be recalculated and edited based on the remainder of the loan term, the loan balance, and the new interest rate.