NetLoan - Refund Modification
Loan Refund Modification
Use case: At times the loan agreement will state that if certain conditions are met all payments made by a borrower to the lender for this loan (both interest and principal) need to be returned back and all entries made regarding the loan should be reversed. This is especially common for loans that provide financing for products that were purchased. This can be done using the Refund modification in NetLoan.
Prerequisites: You will not be able to process a refund with an effective date that is in a period for which amortization entries have already been processed. If you have already processed amortization entries for that period you will need to reverse these using the Time Machine functionality. Here is a helpful article outlining how to do that.
Manual Step-by-Step Process
1. Open the loan record of the loan for which you would like to record a refund. You can do this by navigating to NetLoan > Loan Management > Loan Register and selecting the loan from the list of loans you currently have input into the system.
2. Click the Modify button at the top or bottom of the loan record.
3. Select the Refund modification type from the drop-down menu.
4. Fill in the Effective Date of the refund and if you would like to you can document a reason for the refund on the right as well.
5. Select the Modify Loan button to have the system process the refund and incorporate it into the schedule.
6. You will be directed back to the loan record where you will need to click the Refresh button until the loan amortization schedule has been updated for the refund and the refresh button disappears.
7. Once the refresh button has disappeared and the system has finished updating the schedule you should see a schedule line on the effective date showing the refund.
8. When you run your month-end amortization entries for this loan you will also run the entry that will record the refund. This transaction will tagged to that schedule line that will show up as a link that can be used to navigate to the entry for viewing purposes. If you need help running your monthly journal entries follow the instructions in this article.
9. You will also see that after running the journal entry the loan will switch over to the Fully Refunded status effectively closing out the loan record so no further modificaitons can be made.
10. Note that if we look at the entry that was posted, the amount of cash to be refunded back to the customer for payments made over the term of the loan will be sitting in the appropriate Loan Payable/Receivable Clearing Account and needs to be cleared out through your regular AP/AR processes.
11. Likewise, the value of the loan that was provided to the client (or vendor for the financed product) at the origination of the loan will be sitting in the appropriate Loan Proceeds / Origination Clearing account and will need to be cleared out through your typical AR/AP processes on or before the cash has been collected.
If you have processed a refund in error and need to undo it please follow the instructions in this article.