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Table of Contents (Online Help)

Variable Interest Rates

Loan Performer allows you to set different interest rates for the a running loan on declining balance arising as a result of changes in the Commercial Borrowing Rate (CBR) usually set by the Central bank.

Note that: Before you set the variable interest rates, you must configure the loan products to use variable interest rates at System/Configuration/Loan Products Settings/General Settings. See image below

Loan Performer also offers the flexibility of adding, modifying or deleting the variable interest rates as explained below.

How to set variable interest rates  

To set variable interest rates you go to Support Files/Variable Interest Rates and a screen like the one below appears: 

• Loan Product: From the drop down select the product for which you want to set the rates, e.g. "Loans General".

Note that only products that have been configured to use variable interest rates will appear in this list.

• Starting Date: Here you enter the date when Loan Performer will start applying the interest rate, e.g.,"02/08/2011".

Note that Loan Performer will use this interest rate up to the starting date of the next set rate.

• Interest Rate: In this field enter the interest rate that you want to use, e.g., "40".

Click on the Add button to add the new interest rate and repeat this for all rates that you want to register.

You can click on the Print command button to view\print the interest rates and keep them for future reference.

Then click on the Close command button to exit.

How the variable interest rate affects a running loan:

Note that for the variable interest rate to be effective you also need to activate the check box "Always recalculate interest at repayment if declining balance". This is only applicable to loans on declining balance (Discounted and Amortization).

Note that Any loan on declining balance paid with in the date range of the variable interest rates will be paid at the rate of the variable interest rates. As long as the "Always recalculate interest at repayment if declining balance" has been activated.

The last installment due of the loan below is at 20% before recalculation. Giving an interest amount of 11,396.80 before repayment.

Much as the interest rate of the loan below is at 20%, the variable interest rate is set at 40% from 02/08/2017 onwards with the option "Always recalculate interest at repayment if declining balance" activated the last installment fell due on 01/09/2017 within the date range when the variable interest rate is effected.

There fore the variable interest rate takes precedence over the earlier interest rate and interest is computed at 40% giving rise to an interest amount of 22,058.32 at repayment. See the Loan Ledger card

Much as the interest rate of the loan below is at 20%, the variable interest rate is set at 40% from 02/08/2017 onwards with the options "Always recalculate interest at repayment if declining balance" and When "Use declining balance compounded method to calculate interest" both activated. The installment falls due on 01/05/2017 but is paid on 15/05/2017

The variable interest rate take precedence over the earlier interest rates and interest is computed at 40% interest rate using use declining balance compounded method giving rise to an interest amount of 154.251.07 at repayment. See the Loan Ledger card.

How to delete /modify the variable interest rates 

To delete/modify interest rates you go to Support Files/Variable Interest Rates and a screen like the one below shows up:

From the list of the displayed Interest Rates in the scroll space, click on the rate that you want to delete/modify. The variables for the selected rate will be displayed in the various interest rate parameter text boxes.

• To modify the rate make the necessary changes and click on the Update command button.
• To delete the rate click on the Delete command button.

Click on theClose button to exit the menu.

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