First Period Days
Often when a loan is given, the first payment period (period starting when the loan is given until the first payment comes due) is a little longer or a little shorter than a standard payment period. LoanPro lets you specify how you’d like the system to calculate interest accrual for this first payment period.
The system will automatically default to the Actual option if the Days In Year setting is set to Actual. The actual option will accrue interest in the first period for the actual number of days that are in the period. So, if payments come due monthly then a standard monthly period is 30 days. If your first period is actually 25 days long, only 25 days worth of interest will accrue in the period.
The force regular option lets you tell the system that regardless of the number of days in the first period, the system should look at it like it has the same number of days as a standard period. So, for example, if payments come due monthly, a standard payment period is 30 days long. If your first period is only 25 days long, 30 days worth of interest will still accrue in those 25 days if you choose the force regular option.
If this option is chosen in combination with a Between Periods Interest Application and a Frequency Days In Year selection, if you change the due date for any payment periods, the amount of interest that will accrue during those periods will still be equal to the amount that would have accrued in a payment period of a standard length (e.g. 30 days if the payment frequency is monthly).
The frequency option will look at the first period as being the same length as a standard period for monthly and semi-monthly periods if it is within 1 or 2 days of the length of a standard period. If payments come due monthly, then a standard payment period is 30 days long. if the payment period is semi-monthly, then the standard payment period is 15 days. If the first period on a monthly loan is actually 31, 29, or 28 days long, 30 days worth of interest will accrue in the first period. If the first payment period on a semi-monthly loan is actually 13, 14, 15, 16, or 17 days long, 15 days worth of interest will accrue in the first period.
Unit Period Odd Days
The Unit Period Odd Days is the last option. Interest in full periods is calculated using the payment period interest rate (e.g. r/12) and odd-days interest is calculated using the daily rate (e.g. r/360 x # of odd days). Unit periods are actual months, so from January 10th to February 10th is one unit period and even though it is 31 days, the interest is calculated as a standard frequency period of 30 days. It is important to note that for first periods that span from February to March the unit period will be 28 days (29 days in leap year) and will be calculated as a standard frequency period of 30 days. So, a first period from February 12th to March 14th, which is 30 days, will be calculated as 1 period plus 2 odd days.
Note: It is very common for loan payments to be calculated using one option for days in the first period and another option for how interest actually accrues. Many contracts will calculate the payments using a method that works like the Force Regular option in LoanPro, but accrue interest using a method that works like the Actual option in LoanPro. While this issue is not usually caught by state auditors, or is ignored, it is important to be aware of it when trying to figure out what your loans are actually doing.