NetLoan - Loan Origination Fee Amortization Schedule
Use Case: If a loan has an associated origination fee that has been capitalized and will be amortized through the loan term, NetLoan can automate all the required journal entries associated with the origination fees. NetLoan can also automate the amortization related to a discount or premium by following the same steps outlined below.
Prerequisites: The types and account mappings must be configured with the proper accounts and the desired fee amortization method must be indicated in the NetLoan System Setup page and on the NetLoan Type.
STEP BY STEP PROCESS
- To set up an origination fees - or discount/premium - amortization schedule, follow the instructions detailed in Create a New Loan Record
- When entering the loan information, ensure that the Loan Origination Fees for Capitalization field contains the value of the associated origination fees. For discount/premiums, the Loan Discount / Premium field must contain a value in order for the schedule to generate.
- Follow the instructions detailed in Establish Payment Details, Establish Interest Rate Details, and Establish the Amortization Schedule
- Once the schedule is generated, the "Fee Amortization Schedule" tab will populate along with the loan schedule.
Amortization Methods
NetLoan has the ability to amortize fees/discounts/premiums via straight line or effective interest methods. To select the desired method, navigate to NetLease > NetLease Setup > System Setup and select the appropriate value in the "Default Origination Fees Amortization Method" field.
Further, on the NetLoan Loan Type (NetLoan > NetLoan SetUp > Manage Loan Types), ensure the correct method is selected for the specific loan.
1. Straight Line: evenly amortizes the fees over the life of the loan.
2. Effective Interest : Loan Principal: each period, the fee/discount/premium is amortized by calculating the difference in interest between using the effective interest rate and the APR as applied on the loan balance.
3. Effective Interest : Loan Principal - Fee/Discount/Premium: each period, the fees/discount/premium is amortized by calculating the difference in interest between using the effective interest rate as applied on the loan balance after subtracting out fees/discount/premium and the APR as applied on the loan balance.