NetLoan - Loan Refinance Modification
Loan Refinance Modification
Purpose: Over the life of the loan and especially towards maturity, borrowers may elect to refinance their outstanding loans to either consolidate loans or create a new agreement, among other reasons.
Prerequisites: To have access to refinance functionality in NetLoan, the Go-Live journal entry must have been run on any loan that is being refinanced. To consolidate an outstanding loan as a part of the refinancing, the loan being consolidated must already be commenced.
Step-By-Step Process
- If viewing the loan record, select the Refinance button at the top of the record above the Primary Information.
- You can also navigate to the Refinance Loans page by going to NetLoan > Mass Update Loans > Refinance Loans.
- Select the "Refinance Type", either Create New Loan (e.g. a new loan record representing a new agreement) or Merge Into Existing Loan (e.g. consolidating loans).
- You can also adjust the "Refinance Date" and "Refinance Time of Day" fields in the Refinance Information.
- In the box under the Loans tab, you can filter through loans that are commenced and, therefore, able to be refinanced. Select any loans that you want to refinance by checking the box in the far-left column.
- Once all the necessary loans are selected, click the Refinance button.
- Option 1: If you've selected Create New Loan, you will be redirected to a new NetLoan loan record where you will input and confirm the terms of the new loan being refinanced. The Initial Loan Balance on the new loan will auto-populate with the outstanding principal balance as of the date of refinancing on the original loan. The Beginning Accumulated Accrued Interest field on the Accounting tab of the new loan will auto-populate with the accumulated accrued interest as of the date of refinancing on the original loan. Populate the other fields on the loan record just as you would if you were creating a brand new loan.
- After filling out the updated terms, click Save to create the new loan.
- Option 2: If you've selected to Merge Into Existing Loan, in the "Merge Into Loan" field, select the Loan ID of the previously created loan that all the selected loans will be merged into.
- After clicking Refinance at the top of the screen, you will be redirected to the loan record of the loan listed in the "Merge Into Loan" field. Select the Refresh button until the status shows Complete.
GL Impact (Lender)
After the Refinance modification has processed and the original loan schedule is updated, Run Journals to generate the final amortization entry on the original loan. This will be a Modification Journal Entry that effectively closes out the original loan.
The modification journal entry booked in the closed-out loan will show Notes Receivable and Accrued Interest Receivable being credited and Loan Proceeds & Orig. Fees Clearing being debited. The newly refinanced loan will show a mirroring Initial Balance journal entry that cancels out the amounts of the closed-out loan's entry. Notes Receivable and Accrued Interest Receivable will be debited and Loan Proceeds & Orig. Fees Clearing will be credited, resulting in a net neutral impact.
Previously Outstanding Loan Modification Entry
Refinanced Initial Balance Entry
GL Impact (Borrower)
The modification journal entry booked in the closed-out loan will show Loan Liability and Interest Expense being debited and Loan Proceeds & Orig. Fees Clearing being credited. The newly refinanced loan will show a mirroring Initial Balance journal entry that cancels out the amounts of the closed-out loan's entry. Loan Liability and Interest Expense will be credited and Loan Proceeds & Orig. Fees Clearing will be debited.
Previously Outstanding Loan Modification Entry
Refinanced Initial Balance Entry