In an ideal world, lenders could schedule borrower payments in advance, the payments would run as they come due, and loans would get paid off on time. AutoPays attempt to do just that. While there are still the common problems of closed accounts or insufficient funds, AutoPays allow you to schedule payments to process automatically on specific dates or according to the calculated repayment schedule. And, as a lender, you can set up a payment schedule for payments to be processed every month. AutoPays give the options to process recurring payments, single payments, or you can simply choose to process payments as they come due on the loan (this option is labeled "Recurring Match Schedule").
Below, we'll explain how to create new AutoPays, provide use-case examples, and define the terminology associated with the topic.
Scheduling an AutoPay
To schedule an AutoPay, begin by selecting a loan. Within the specific loan, navigate to Servicing > AutoPay. To start the initiation of a new AutoPay, click 'Schedule New AutoPay' in the top right corner of the page. This will bring you to the 'Payment Info' tab which includes the available payment profiles. Select a payment profile and then click the 'AutoPay Info' tab. Here, you will be able to determine multiple settings. We recommend clicking the calendar icon since it allows you to select specific dates and displays when the regular payments on the account are due.
The AutoPay Info tab is where you can determine the following information.
This is the name of the AutoPay that distinguishes it from others on this loan. For example, "Regular Monthly Payment".
Payment Profile Type
Whether the payment profile is a bank account or credit/debit card.
This is the type of payment with the following options:
Pay Extra Towards
This tool allows you to pay extra towards interest or principal if the AutoPay amount is greater than the payment amount from the loan setup.
The first apply date for the AutoPay. Depending on the AutoPay Type, this might be a field that lets you select a date (or dates), or it might be set as the next payment date from the loan's payment schedule.
The first process date for the AutoPay, which must be at least one day before the Apply Date. Like the Apply Date, it might be an editable field or preset depending on your AutoPay Type.
Whether the amount will be calculated from loan values or something you manually input. The options are Fees Due, Next Due Amount, Next Period, Amount Past Due, P&I Past Due, and Static. Static allows you to put in any number.
This is the amount that is going to be processed every month on a specific date.
If the AutoPay type is Recurring Payment, this field lets you determine how frequently the AutoPay will run. If the type is Recurring Match Payment, this shows how frequently it will run, but you can't edit the field; it's determined by the frequency you entered in loan setup.
If the AutoPay type is Recurring Payment, this lets you select how many payments the AutoPay will run. If it's a Recurring Match Payment, this will display the loan term from loan setup.
Payment Allocation Tab
Review and Confirmation
The Confirmation tab shows a summary of the information you've entered. Review the information to ensure it's accurate, and click 'Finish' when ready.
Your scheduled AutoPay will now be listed in the AutoPay Manager.
AutoPays are an easy and efficient way to initiate payments since lenders won't have to manually enter in payments every month. They also help make customers aware of when a payment will occur every month. Automatic payments are likely to reduce the amount of missed payments since the funds are automatically pulled from a customer's account at each given date.
However, AutoPays may not work for all lenders and their borrowers. As you may have experienced as a lender, some customers might not want to use AutoPays. Some feel uncomfortable handing their lender the power to pull money from their account. Others might not have a bank card or bank account set up and wish to only pay in cash. It is also important to note that some lending regulations prohibit you from initiating transactions in certain circumstances, like the CFPB's Small-Dollar Rule.
Lenders use AutoPays mainly to process payments on a regular schedule. The most popular option is Recurring Match Schedule.
Lenders who process NACHA payments will use the AutoPay feature to add payments to batches. Batches are then sent as a flat file to their processing bank. The difference when using AutoPays in this way is that the movement of money must be initiated outside of LoanPro.
Lenders like the AutoPay feature because the event-based notifications AutoPay Created and AutoPay Failed make it easy to communicate automatically with customers about their payments.
Here are some common terms used with automatic payments:
This is the date when an AutoPay payment will apply (signified by purple dots on the calendar).
Next Due Date
This is the date of when the next payment is due (signified by yellow dots on the calendar).
Regular Due Date Payment
This is the regular date of when a payment is due (signified by blue dots on the calendar).
This article covers the extent of our material on AutoPays. But if you'd like to learn more about other types of payments, we recommend checking out our Payments article.