NetLoan — Interest Calculation Basis: Credit Limit Method
Overview
The Interest Calculation Basis field on the loan type controls what balance interest is calculated against. By default, NetLoan calculates interest using the average daily balance of the outstanding loan — the amount actually drawn and owed. The Credit Limit option changes this: interest is calculated on the full credit limit for the life of the loan, regardless of how much has actually been drawn down or repaid.
Note: If the Credit Limit Type is Revolving and a Minimum Payment Calculation Method is set, the default will be Average Daily Balance Not Including Charges - Monthly. For every other loan, the default is Average Daily Balance as mentioned above.
This is most commonly used for lines of credit where the lender charges for the full commitment amount rather than just the utilized portion — sometimes referred to as a "Dutch" or commitment-fee-style interest structure. Internally, a Dutch loan setup means the Loan Type's Interest Calculation Basis is set to Credit Limit; a Non-Dutch loan setup means the field is left blank so it defaults to Average Daily Balance. This is a one-time setup performed on the loan type before loans of that type are created.
Prerequisites
- The Line of Credit feature must be enabled on the NetLoan Global Settings record.
- A Loan Type must exist or be created. See NetLoan — Loan Type Configuration.
- A NetSuite role with edit access to the Loan Type record.
- The Loan Type's Loan Credit Limit Type should be decided before configuring this field, since some interest calculation options are restricted based on it (see Setup Options).
Setup Options
Navigation
- Top navigation: NetLoan > Setup > Manage Loan Types
Loan Type — Interest Information
| Field Name | Field Type | Description | Dependencies | Options / Example | Field ID |
|---|---|---|---|---|---|
| Interest Calculation Basis | Select | Determines what balance interest is calculated against for loans of this type. Lives in the Interest Information section of the loan type. | None | Average Daily Balance — calculates interest on the loan's actual outstanding balance, consistent with standard NetLoan interest calculations. Credit Limit — calculates interest on the full credit limit for the loan, regardless of the amount drawn, current balance, or payments made. | custrecord_da_type_interest_basis |
The list also retains the loan type's other, pre-existing revolving-specific interest calculation options. Those remaining options are only valid when the loan type's Credit Limit Type is set to Revolving. If one of them is selected on a loan type where Credit Limit Type is set to Non-Revolving (or left blank), NetLoan blocks saving the record until a valid option is selected.
Average Daily Balance stays the default for every loan type — existing loan types are not affected unless this field is changed intentionally.
Note: If the Credit Limit Type is Revolving and a Minimum Payment Calculation Method is set, the default will be Average Daily Balance Not Including Charges - Monthly. For every other loan, the default is Average Daily Balance as mentioned above.
Use Case Specific Setup
Use Case: Full Line of Credit Interest (Credit Limit Method)
For a line of credit where the lender charges interest on the full committed amount rather than the drawn balance:
| Field | Setting | Notes |
|---|---|---|
| Interest Calculation Basis | Credit Limit | Interest accrues on the full credit limit for the life of the loan. |
| Credit Limit (on the loan record) | Full committed amount | This is the amount interest is calculated against — set it to the full line of credit, not the amount initially drawn. |
Example:
| Credit Limit Method | Standard (Average Daily Balance) | |
|---|---|---|
| Credit Limit | $100,000 | $100,000 |
| Amount Drawn | $40,000 | $40,000 |
| Current Balance (after a $5,000 payment) | $35,000 | $35,000 |
| Interest calculated on | $100,000 | $35,000 |
The interest basis stays fixed at $100,000 for the life of the loan under the Credit Limit method — it does not decrease as payments are made or increase/decrease as additional amounts are drawn.
Use Case: Standard Revolving or Term Loan
For most loan types, leave Interest Calculation Basis set to Average Daily Balance. This preserves NetLoan's standard behavior of calculating interest on the loan's actual outstanding balance.
Considerations
- The credit limit is fixed once the loan commences. The Credit Limit field on the loan record locks after the loan is commenced and journal entries have posted — it cannot be edited from that point forward through the UI or a modification type. If a borrower's committed line increases, set up a new loan for the additional amount rather than trying to raise the credit limit on the existing loan.
- Because the Credit Limit method ties interest to a value that doesn't change with usage, confirm with the client up front that the credit limit on the loan record reflects the full committed line — not just the initial draw — before commencing the loan.
