NetLoan - Payment Holiday Modification

Use Case: The Adjust Loan Terms modification can be used to set a payment holiday on a loan record. A payment holiday is when a client changes the monthly payment to $0 and sets the rate to 0% for a specified number of periods before changing it back. A payment holiday may also include extending the loan term for the length of the payment holiday. This is done to provide the borrower a chance to catch up on their payments (common in the UK).

Prerequisites: Loan modifications must be entered in NetLoan within the month and prior to month-end amortization

STEP BY STEP PROCESS

  • Navigate to a loan record where the modification is to be recorded and click the Modify Loan button
  • On the Loan Modification click the Modification Type dropdown menu and select Adjust Loan Terms
  • Next, update the Payment and Rate sublists as necessary for the loan modification. For example, consider a 12-month loan with a 2.5% interest rate that has a monthly payment of $900 on the last day of each month. This is the original amortization schedule for this loan:
  • Imagine a payment holiday was to be created, lasting from August - September with payments resuming in October. Additionally, the loan term would be extended by the same length as the payment holiday, 2 months. The following payment records would need to be added:
    • A $0 payment record with an effective date of August 31 to zero out the normal monthly payment.
    • A $900 payment record with an effective date of October 31 to resume the original monthly payment amount. 
  • The loan term would need to be extended by 2 months:
  • Additionally, the following rate records would need to be added:
    • A 0% rate record with an effective date of August 31 to stop the accrual of interest during the payment holiday.
    • A 2.5% rate record with an effective date of October 31 to resume the accrual of interest at the end of the payment holiday.
    • Once the payment and rate records are added and the loan term/maturity date are updated as necessary, click Modify Loan. 
    • The updated amortization reflects the payment holiday and extended loan term:
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