Payments – Intermediate

Complexity:    

Audience: Loan Servicer or Collector, Upper Management, Developers, Loan Servicing/Collections Managers

Introduction

As borrowers make payments on their loans, it is essential that the funds are processed and tracked. LoanPro provides a place for lenders to track payments that they have processed, cash that they have received, and for some types of payments, LoanPro can process them with the help of integrated payment processors. This article will explain how to log a payment and provide details of all the payment options. This article contains expandable folds that will explain each of the available options when making a payment. For more detail you can expand the folds that coordinate with your loan settings. If you want a more basic introduction, read Payments 101.

How Logging a Payment Works

Logging payments is one of the most frequent and important tasks you will do inside of LoanPro. LoanPro is designed to make the process simple.

To log a payment, open a loan and navigate to Servicing > Payments

Now you should see a blue 'Log Payment' button. Clicking the button will allow you to choose 'Log Payment' or 'Log Recovery Payment.' Recovery payments are made on accounts that have been charged off. For this example click 'Log Payment.'

Payment Information

After selecting 'Log Payment,' your screen will show the Payment Information page. Here you can choose type of payment, date, amount, info, and payment methods. This page will also show any custom fields you have created.

Payment Information Fields

Here is a breakdown of the vast array of payment information settings:

Field

Description

Type of Payment

There are several different types of payments to choose from:

  • Regular. This is a normal type of payment you can make.
  • Principal Only. This is if you want to make a payment solely to principal.
  • Discount. This is a payment that only goes towards discount.
  • Fees Only. This is a payment that only goes towards fees.
  • P&I. This type of payment goes towards both interest and principal.
  • I&P Only. This type of payment goes towards interest and principal.
  • IFP. This type of payment would go towards interest, fees, and principal.
  • Escrow. This type of payment would go towards escrow.
  • Custom. This type of payment allows you to 'force' how a payment will allocate (ex. $100-principal, $50-fees, and 25-interest).
  • Payoff. This type of payment goes only towards payoff on the loan.
  • Payoff Fees then Due Fees. This payment type goes towards payoff fees and then towards due fees.
  • Interest, Payoff Fees, Due Fees, Principal. This payment type goes towards Interest, payoff fees, due fees, and then principal.
  • Custom - User Forced. This is similar to custom type but this allows you to put extra towards the amount you are "forcing" the payment to allocate to. This makes the interest due on a loan go to negative.

Waterfall Application

The waterfall application is the order a payment will apply to a loan, which is determined by the payment type. Clicking 'Waterfall Application' beneath 'Type of Payment' will show that payment type's application order.

Date

This is the date you want the payment to be processed (you can select the calendar icon to select specific dates).

Amount

This is the amount of the payment.

Payment Method

The method of payment with these following options:

  • Cash
  • Check
  • Credit or Debit Card
  • Bank Account
  • EFT
  • PayNearMe
  • Payroll
  • Email Transfer
  • Direct Deposit

When you have all of your information entered, scroll to 'Advanced Settings' or click 'Next' to move on.

Advanced Settings

The advanced settings section will let you decide how a payment will apply extra funds if there are any. Most of the time, this will autofill with company default values. The advanced options are different depending on the Interest Application setting on the loan.

Between Periods

If the interest application on the loan is set to between periods, you are presented with three options: “Extra Towards – Between Periods”, "Cash Drawer", and “Early Payment”.

Between Periods Options
Extra Towards – Between Periods lets you choose how an amount paid, that is greater than the amount due on the loan, will apply. For example, if $200 is due on the loan and the customer pays $210, this setting will determine how the “extra” $10 applies. Your options are “principal only” and “next payment”.

Principal only will apply the extra amount directly to principal. This will not affect the past due calculation or the next payment amount on the loan. For example, if the “extra” amount is $10 and the next scheduled payment is $200, the next scheduled payment will still be $200.

Next payment will apply the “extra” amount to the next payment. The application date of the “extra” amount will be the same as the next scheduled payment date. For example, if the “extra” amount is $10 and the next payment comes due on July 1, $10 will apply to the loan on July 1.

Principal only will apply the extra amount directly to principal. This will not affect the past due calculation or the next payment amount on the loan. For example, if the “extra” amount is $10 and the next scheduled payment is $200, the next scheduled payment will still be $200.

Next payment will apply the “extra” amount to the next payment. The application date of the “extra” amount will be the same as the next scheduled payment date. For example, if the “extra” amount is $10 and the next payment comes due on July 1, $10 will apply to the loan on July 1.

Early Payment

The 'early payment' option lets you choose whether early payments will be applied on the due date or on the date they were actually paid. For example, if a payment is due on July 1 and the customer makes a payment on June 27, choosing “Yes” will mean the payment applies on June 27, choosing “No” means the payment will apply on July 1. The earlier a payment applies, the less interest the customer will ultimately pay on the loan, so choosing “Yes” as your early selection will be a benefit to the customer. To see how interest is calculated for an early payment, read the between-periods section of the interest application article.
Between Transactions

If the interest application is set to 'Between Transactions,' Advanced Settings will offer “Extra Towards – Between Transactions” and "Cash Drawer" options.

Between Transactions Options

Extra Towards – Between Transactions lets you choose how an amount paid, that is greater than the amount due on the loan, will apply. For example, if $200 is due on the loan and the customer pays $210, this setting will determine how the “extra” $10 applies. The options are “Classic”, "Classic v2," “Principal”, and “Principal Only”.

Classic applies the extra amount to the current payment, then the next payment, and finally to principal only.

Classic v2 works like Classic, except the borrower can prepay two periods in advance.

Principal applies the extra amount towards principal. This will reduce the amount due for future payments.

Principal Only applies the extra towards principal, but will not reduce the amount due for future payments.

Cash Drawer

If the agent logging the transaction has checked out a cash drawer, the system will display it here. When the payment is logged, the cash drawer will also track that money was added to the drawer.

Payment Profile Information

The 'Payment Profile Information' is where you choose how this payment will be made (cash, card, bank account, etc.). If the payment is cash, check, or other items that do not need to be processed, you do not need to select a payment profile. If this payment needs to be processed, ensure your Secure Payments account is properly configured to process payments. If you don’t have credentials entered for any payment integrations in your company account, you will receive a warning on this page stating that you need to enter those credentials to enter payment data here.

You will see a list of payment profiles associated with your customer. Either check the box for an existing payment method, or click 'Add a Profile' to create a new payment profile for this customer. Once you select a payment profile, you can also choose the processor and convenience fee.

The convenience fee options will default to the settings in Loan Settings > Settings.

You can choose to enter a flat fee, enter a fee percentage (this is a percentage of the payment you are logging), or decide between the greater or lesser of a flat fee or a percentage. You can also choose to waive a convenience fee.

When you're done here, click 'Next'. If the loan is linked to another loan in the system, you will be taken to the Split Payments section of logging a payment. If you do not have linked loans configured for split payments, you will be taken to the 'Preview & Confirm' section.

Preview & Confirm

The 'Preview & Confirm' page will show you how the payment will be applied. It will also provide the text for customer authorization.

To customize this text, go to Settings > Loan > Payments > Authorization Text inside your company account.

If the payment application is what you expect, click 'Process Payment' to finish logging the payment. Otherwise, go back to the Payment Information screen and modify the payment.

Secure Payments & Payment Processors

Ideally, you don't need to worry about anything beyond clicking 'Process'; LMS sends the payment request to Secure Payments, which in turn sends the request and the borrower's payment profile to your processor. The processor moves funds from the borrower to your bank account, and all is right in the world.

When a payment succeeds or fails, the processor will send an update back to Secure Payments and LMS. In either software, you'll be able to review the payment in the borrower's payment history. LMS will also automatically update the loan's calculations during daily maintenance.

In the event that a payment fails or needs to be reversed, we recommend working with the payment processor company directly.

Common Uses & Questions

Does LoanPro process all of my transactions? LoanPro is not a payment processor, however we use our sister software Secure Payments and integrated payment processors to help lenders process payments.

How are 'payment method' and 'payment profile' different? A payment method specifies how to borrower will make their payment (e.g. bank account, debit card, credit card, cash). A payment profile is the actual credit card or bank account owned by a person (e.g. if a borrower has two credit cards, each card is a payment profile).

Do I have to log each payment by hand? LoanPro has multiple features that make payments easier. AutoPays can be set up so the payment is made automatically. Imports are also an option when you have to log a large number of payments at once.

For a deeper explanation of information fields, read Payment Information. Understanding Interest application will help you select the best options in the Advanced Settings. Charge-Offs 101 is a great place to begin learning about recovery payments and why they are used.

What’s Next

Now that you've learned how payments work, you're ready to start logging them.

Adding a Customer Payment Profile: How to create a payment profile for a customer.

Payment Processor: What are payment processors, and which ones are integrated with LoanPro.

AutoPays: How to set up an AutoPay and how they work.


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