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Set Overdraft

An overdraft is an extension of a credit facility from a Micro finance or bank that is granted when a client's account reaches zero. The overdraft allows the account holder to continue withdrawing money even when the account has no funds in it or has insufficient funds to cover the amount of the withdrawal. Usually with interest / fee charged on the credit extended.

Loan Performer has an option for allowing clients to overdraw their savings accounts and subsequently allows you to levy interest or commission charges for the overdraft.

To enable this overdraft facility, you must remove the overdraft protection for a particular savings product by unchecking the Overdraft Protection checkbox at System/Configuration/Savings/Savings Accounts Settings.

Note that when a minimum savings balance is set under System/Configuration/Savings/Interest on Savings, the system will respect this minimum balance over the overdraft. So set the minimum balance of that savings product to negatives to allow the account to run to negatives as seen below:

How to set overdrafts

To set overdrafts on savings products you go to Savings/Overdrafts/Set Overdrafts and a screen like the one below shows up:

• Savings Account: Click on the Search button to select the savings account for which you want to set the overdraft, e.g., "DB/I/000014".
• Product: From the drop down select the product for which you want to set the overdraft, e.g., "Free Savings".
• Client Name:The client name for the selected savings account will automatically be displayed in this field, e.g., " nanana".
• Client Code: In this field, the client code will automatically be displayed for the selected savings account, e.g., "DB/I/000014".
• Maximum Negative Balance is: In this field enter the maximum amount by which this account can be overdrawn, e.g., "1,000,000".

Note that when a minimum savings balance is set under System/Configuration/Savings/Interest on Savings, the system will respect this minimum balance over the overdraft.

• Expiry Date: Here set the date until which the account can be overdrawn, e.g., "30/06/2010". Note that overdrawing the account after this date will not be allowed.
• Interest Charged: In this field enter the interest to be charged for this overdraft facility, e.g., "10%". This percentage amount will be added/charged to the amount to be withdrawn as seen below:

• Recognize interest until: Loan Performer will recognize interest on overdraft for a specific period. In this field enter the date until which the interest on this account will be recognized, e.g., "30/11/2020".
• Business Sector: Select from the drop down list the business sector to which the client belongs, e.g., "Agriculture".
• Loan Category: From the drop down lists, choose the applicable loan category 1, 2, or 3. The categories should have been previously defined at the menu Support File->Loan Categories.
• Collateral: If a collateral is required for one to take an overdraft then enter the collateral information in the provided spaces. Loan Performer allows you to enter up to four collateral items.
• Guarantor: Select from the drop down guarantor's list the person to guarantee or stand in surety for this overdraft. Loan performer allows you to enter up to three guarantors.
• Status: Here you are able to access the guarantors personal information like name, loan number, loan amount, application date and expiry date.
• Description: Add a brief description for the overdraft being extended to this client, e.g., "Allowance for school fees payment".
• Charge: This is a service charge that is paid when the overdraft is actually taken by the client, e.g., "1,200". This charge is made on every transaction involving an overdraft.
• From Savings A\C: Select, from the drop down menu, the savings account from which the overdraft commission will be deducted.

Click on the Add button to save the overdraft settings or the Update button to save any changes made thereof.

Related Topics

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