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One of the most valuable metrics in loan servicing is delinquency — how far behind a borrower is in terms of payments, days, or dollars. You can use brackets to track days and dollars past due, but if you're wanting to track the number of payments a borrower has missed, delinquency buckets are the tool for you.
This article will explain how delinquency buckets work in concept and where they fit into.
Delinquency buckets are a loan-level report that show how many payments have been missed on a specific loan. Each bucket corresponds to a missed payment, and Bucket 1 represents the most recently missed payment. For example, a loan that is a few days behind on one payment would have only one delinquency bucket, which represents that single missed payment. But a loan that's four payments behind would have four buckets, with Bucket 1 representing their most recent missed payment and Bucket 4 representing the oldest missed payment.
Note that the buckets only represent the number of missed payments, not the number of days or the dollar amount past due. Each bucket with hold all the loans missing that number of payments. All loans that missed a dozen small, weekly payments would be in Bucket 12, but all loans that missed one large, biannual payment would still just be in Bucket 1.
When a payment is made, it will be applied to the oldest missed payment. Once the oldest payment has been made in full, it's bucket will be removed from the loan, and the loan will go down to the next highest bucket.
Suppose you have a loan with regular monthly payments of $100. The borrower has fallen behind and missed four payments. This means they're $400 past due, 120 days past due, and in Bucket 4.
Then the borrower makes a payment for $100, which applies to oldest bucket. Now, the borrower is only $300 past due, 90 days past due, and in Bucket 3.
Let's start with the same situation: The borrower has missed four monthly payments of $100, meaning they're $400 and 120 days past due, and in Bucket 4.
But in this case, the borrower pays only $50. The oldest bucket wouldn't be full, so the loan would still be in Bucket 4, and still be 120 days past due, despite only being $350 past due.
Where Do Delinquent Buckets Fit?
You can use delinquency buckets in two areas of the software. Within an individual loan, you can navigate to Reports > Calculated > Delinquency Buckets to see which bucket a specific loan is in. This can help you figure out how much a borrower would need to repay to reduce their number of days past due.
You can also see how many loans you have in each bucket from the Loan Manager. Navigate to the statistics screen, and then scroll down to Delinquency Buckets, where you can see how many loans are in each.
Our article Using Delinquency Buckets shows how to use these tools in more depth.
This Feature is Not
Let's clear up any possible misconceptions about delinquency buckets.
- Delinquency buckets do not indicate amount past due or days past due. They only show the number of payments missed, but each bucket will list how much is owed, and how many days past due it is. If you instead want to sort or filter loans and only see those that are within a certain range of days or dollars past due, we recommend using brackets.
- Delinquency buckets cannot be customized. Whereas brackets let you define how the range of how far past due a loan must be, delinquency buckets just count the number of missed payments.
With the basic concept down, you're ready to configure and use delinquency buckets in the software. The natural place to go from here is with Using Delinquency Buckets.
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