Overview

This section details the setup for Loan Products that use the Profit Rate (Interest) calculation method. With this method, the interest is charged at the time the Loan Agreement is created.

For these loans, in default interest is calculated on a per-installment basis, meaning it's charged on the overdue installment amount.

• Agreed Instalment Dates and Agreed Instalment Amounts will be used for calculations.
• In default interest is capitalized at the end of the month, becoming part of the overdue amount, and subsequent interest will also be charged on it.

In Default Interest Amount Calculation:

• In Default % of Overdue / Number of days in Month * Number of days

In Default % of Overdue Calculation:

• Overdue Amount * (In Default Rate / 100.00)

Additional Setups

Financial Ledgers

You have the option to use the same ledgers as those for the normal Profit Rate Interest Calculation Method.

If you choose not to, you must add two Interest Sub-Ledgers under the main interest control account:

• One for Interest Received.
• One for Interest Reversed.
  • Alternatively, you can choose to use only one ledger if preferred.

Financial Events

You must add three new Events for Profit Rate Loan Products:

• In Default Interest Charged:
  • Event Attribute: In Default Interest Charged
  • Debit (Dr): Client Control
  • Credit (Cr): Interest Received or In Default Interest Received (depending on your ledger setup choice)
• In Default Interest Adjustment:
  • Event Attribute: In Default Interest Adjustment
  • Debit (Dr): Client Control
  • Credit (Cr): Interest Received or In Default Interest Received (depending on your ledger setup choice)
• In Default Interest Reversal:
  • Event Attribute: In Default Interest Reversal
  • Debit (Dr): Interest Reversed or In Default Interest Reversed (depending on your ledger setup choice)
  • Credit (Cr): Client Control

Important: When setting up a new Loan Product with the Profit Rate Interest Calculation Method, you are required to set up a corresponding Loan Agreement document for that product.

Documentation

Section	Description	Documentation
General	General configurations for Profit Rate	General
Interest and Fees	Interest and Fees configuration for Profit Rate	Interest and Fees
Users	User access to loan products	Users