Contract matching
Match your existing contracts using LoanPro's modern calculator.
Whether you’re just getting started with our software or purchasing an existing loan, you need to know how to match the contract that the loan is performing under. This article will walk you through a step-by-step process that you and our representatives go through when matching contracts.
Preparation
Before you begin you must know the following information concerning the loan:
| Information | Description |
| Loan amount | Beginning principal balance |
| Contract date | The date the loan starts/started accruing interest |
| First payment date | The date the loan has its first payment coming due |
| Frequency | The frequency of the loan payments |
| *Interest rate | The interest rate for the loan |
| *Term | The total number of loan payments |
| *Payment amount | The regular payment amount of the loan over the course of its life. |
*As long as you know at least two of these items, the system can figure out the third value for you. All of this is very standard information for a loan contract to show, but if any of the required information is missing then it is not going to be possible for you to match the contracted information.
You will also need to determine what calculation type of loan is being computed:
- Simple interest (Most common by far)
- Simple interest locked
- Interest only
- Lease
- Rule of 78
If you're not familiar with these calculation types, we recommend reading our Interest Calculation Types article that will explain each type in more depth.
Because Simple Interest is the most common “Business-to-Consumer” loan type, we'll use that as our example in this article, but the steps of the process will be similar for any type of loan.
Getting started
To start off, some basic information is required to calculate any loan. Navigate within a loan to Account Setup to enter the above information and get a quick calculation as you continue to tweak the settings. You will be working in the ‘Loan Terms’ and ‘Advanced Configuration’ tabs.
The ‘Loan Terms’ tab includes these fields:
- Total amount
- Interest rate
- Term
- Contract date
- First payment date
Once the required fields have been entered, select ‘Save & Calculate’ at the bottom of the page.
If you are relying on the system to calculate the interest rate or term based on the payment amount, please enter in a placeholder like the number “10” for either of the fields for the first time, then proceed to use the ‘Payment Match’ option from there.
Interest accrual
Once the loan has been calculated, the next step is to match the interest accrual. Before we worry about the payment amount that was generated by calculating the loan, first check the interest and principal breakdown of the first payment. Within this same loan, navigate to Reports > Transactions.
If the interest accrual matches for your loan, then you are finished with this step and can skip to the ‘Payment Amount’ section of this article.
If interest accrual does not match, adjust the following settings inside of the initial Setup Terms > Advanced Configuration to manipulate the breakdown. We have found it most effective to change one setting at a time so that it is easily recognizable which changes had the desired effect. After each settings change, simply select the ‘Save & Calculate’ button between each change and consult the Reports > Transactions tab until the interest accrual matches. The following settings will help assist you in making these adjustments:
- First day interest: Select whether or not you would like interest to accrue on the contract date.
- Days in year: Select the number of days used in your interest calculation. “Frequency Specific” will use a 360 day year for monthly frequency, and a 364 day year for weekly and bi-weekly frequency. “Actual” will use a 365 day year regardless of frequency.
- 1st period days: This option will only have an effect if the ‘Days In Year’ field is set to ‘Frequency Specific’. Set this field to ‘Force Regular’. For more information about this field, see our article on special cases.
- Round decimals: Best utilized when the original interest calculation is very close to the desired breakdown. If you’re within pennies then we recommend changing from ‘two’ to ‘seven’. If you’re already at ‘seven’ then change to ‘two’.
If you need further help, reach out to our success specialists.
Payment amount
In most cases, once the interest accrual matches so does the payment schedule. If it does not match, LoanPro has some helpful tools to get the payment amount in line with what you’re expecting it to be.
The following tools are available to help you match the payment schedule.
- Payment match: Allows you to have the system alter the values of term, interest rate, or underwriting fee in order to roll the payment to your desired amount. We recommend using ‘Term Exact’ when using the Payment Match tool, as this will shorten or lengthen the term to solve for the payment amount.
- Custom payment schedule: Allows you to create a custom repayment schedule for this loan.
- Force: An easy, condensed version of the custom payment schedule tool.
In the ‘Advanced Configuration’ tab, the following fields can be changed to help match a payment schedule.
- Beg/end: If you have a payment amount that is matching interest accrual and all numbers except for the payment amount, try switching this to ‘Beginning’. If it does end up matching, your loans are actually being calculated as a rent/lease instead of a loan. We recommend checking with our support staff to make sure that ‘Beginning’ is actually what you would like to use.
- Last as final: Set to ‘Yes’ if contract balloons at the final payment. Set to ‘No’ if it extends at the regular payment amount. You will need to use this with the ‘Schedule Round’ tool when trying to adjust the final payment amount.
- Schedule round: Round up or down based off of the final payment amount on the schedule.
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