The Difference Between Activating Loans and Active Status Loans

Introduction

LoanPro is a robust software. And due to the naming conventions of the loan industry, there are some instances of similar terminologies used for different concepts. One particular instance that may cause confusion is the difference between an “active loan status" and an “activated loan.” We'll explain the difference in this article.

Activating a Loan

Activating a loan is the user's way of telling LMS to proceed with the calculation of the loan using the numbers they have entered. Activating the loan locks those values in and ensures the consistency of amortization. When the loan is activated, LMS recognizes actual dates instead of looking at the loan term as a singular length of time with no specific dates associated with it. In other words, missing scheduled payments will now accrue interest, and LMS will display forecasted payments only in the future of the current date.

Inactivated loans will still accrue interest if loan values have been entered and the 'Save & Calculate' button has been clicked. If the loan values have not been saved and calculated, no interest will accrue. 

Here are some results of activating a loan:

  • Loan terms will be locked
  • Late fees will be applied if future payments are missed
  • The past-due amount and payoff amount will be calculated correctly
  • You will have access to additional tools like Loan Modification, Advancements, Change Due Date, etc

Active Loan Status

On the other hand, an active loan status is a little different. Loan statuses are merely a status label that is applied to a loan for tracking purposes, and one of the default statuses is “Active".

An "Active" loan status is intended for loans that are actively being serviced, meaning payments are being made. LoanPro allows you to customize your loan statuses, though; if you would prefer, you can change the name of this status to something else, such as “Open.” We recommend making a change if it would make it easier to keep the terminologies straight.

Conclusion

Despite the similarity of these terms, there are differences. To summarize, activating a loan locks in its setup terms and schedule, while an active loan status is a status label assigned to a loan that is being serviced. It is possible to have a loan with an active loan status that is not currently activated.

If you'd like to learn more about the topics we've discussed in this article, and you can bear to read the word "active" a few dozen more times, consider reading some of our other articles:

Activated Loans

Loan Status and Sub-Status


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