Set by the lender, Interest Rate is a configurable number that dictates how LoanPro’s LMS calculates and accrues revenue on a borrower’s outstanding principal balance. Each interest rate is accompanied by a set frequency:

• Annually
• Bi-weekly
• Monthly
• Semi-annually
• Semi-monthly
• Weekly

Learn more about the interest rate types and how they compare to each other here.

In addition to choosing an interest rate and frequency, each loan must have an Interest Method. This can be a fixed or variable interest rate.

• Fixed: Interest rate does not change over the life of the loan.
• Variable: Interest rate can shift, based on changes to the lender-controlled index rate.

LoanPro supports four primary interest calculation types, methods used by lenders to determine how much a borrower pays back over time.

• Interest Only: Schedules monthly payments that only require the accrued interest to be paid. These loans generally conclude with a balloon payment at the end of the term.
• *Rule of 78: Allocates more interest to earlier payments. It sums the loan term to create a fraction for each payment, meaning borrowers pay a larger portion of interest upfront.
• Simple Interest: Calculates interest in real time, using only the remaining principal balance and the exact number of days between payments. This is the most commonly used interest calculation type.
• Simple Interest Locked: Determines a set interest schedule at the beginning of the loan. The interest allocated to each period does not change over the loan term—regardless of when a payment is made.

These calculation methods can be selected when the loan is being created or later via the account page. To see or edit the Calculation Type, navigate to the desired loan account, then click Account Setup > Setup Terms > Advanced Configuration.

If the loan is active and you would like to adjust the Calculation Type, you need to Inactivate it in order to make changes. However, if a loan is inactivated and then reactivated with a new Calculation Type after transactions have been logged, it could potentially affect TILA numbers. Please contact your LoanPro representative before attempting to make any changes.

*Rule of 78 loans are illegal in many areas. Check the laws in the jurisdiction where your company resides before accruing interest based on the Rule of 78.

The Discount Calculation setting controls how the LoanPro LMS amortizes and recognizes unearned merchant discount revenue from the principal portion of a borrower's payment. There are five types available:

• Full: Pays only the discount portion of the principal amount until the entire discount amount has been paid.
• Percentage: Calculates the discount amount by multiplying the principal portion of the payment by the original discount and dividing that by the original principal balance.
• Percent Fixed: Forces the principal portion of a payment to permanently split using the original ratio of discount-to-loan amount—even if there is no remaining discount balance due on the loan.
• Rebalancing: Recalculates the remaining discount by dividing the unpaid discount balance by the remaining number of periods in the loan term.
• Straight Line: Allocates a fixed, total discount amount evenly across a set number of billing periods.

This setting controls when a borrower pays accrued interest during a payment period. 

• Beginning: Interest is paid at the beginning of a payment period.
• End: Interest is paid at the end of a payment period.

The First Day Interest setting determines whether interest for an account should start accruing on the contract date or the following day.

This setting determines when any assessed loan fees (i.e., late fees or convenience charges) legally become due and enter the borrower’s payment cycle.

• Date: Forces the assessed fees to come due on the exact calendar day the charge is applied to the loan.
• Period: Automatically shifts the due date of assessed fees to the first day of the active billing period.

The Max Interest Amount setting can be used to cap the amount of interest charged during the life of the loan or for specified periods in the loan term. When using this setting, interest accrues at the normal rate until the cap is met. Then, it stops accruing interest for either the rest of the loan term or the given period—depending how the setting is configured.

If you want to set a max interest amount for the life of the loan, access Account Setup > Setup Terms > Advanced Configuration > Max Interest Amount. You can enter an amount or select the Set as Finance Charge option to set the max interest amount to equal the finance charge calculated for the loan.

If you want to set a max interest amount for a given period instead of the life of the loan, navigate to Account Setup > Setup Terms > Advanced Configuration > Max Interest Amount > Set Per Period.

Example ($0.10 daily interest rate with a $0.37 interest cap):

Interest cap logic resets at the start of every period. If no interest cap exists for a specific period, interest will accrue uncapped.

The First Period Days setting determines how the interest calculator handles an irregular first payment cycle, when the difference between the contract date and the first due date is not equal to a standard unit period. Options include:

• Force Regular: Calculations are based on a regular number of days in the first payment period—regardless of the number of days in that period.
• Frequency: Calculations are based on a regular first payment period if the length of the period is within one day of a regular period.
• UnitPeriod Odd Days: Calculations are based on a unit period of 30 days for the month—even if the actual month has 28 to 31 days, plus any odd days.
• Actual: Calculations are based on the actual number of days in the first payment period.

If the Days In Year setting is set to Actual, the First Period Days setting will automatically be set to Actual—and cannot be changed. If the Days In Year setting is set to Frequency, this setting defaults to Frequency—with the ability to be changed.

Read more about custom payment schedules.

The Last As Final setting determines how a loan handles higher than expected interest accrual or missed payments.

• No: Adds payments onto the existing payment schedule and increases the loan term to adjust for missed payments or extra interest accrual.
• Yes: Makes the last loan payment larger to adjust for missed payments or extra interest accrual.

This setting is used to both suspend interest accrual on a loan and resume the interest accrual. It is available when first creating a loan account. Once a loan is already active, changes can be made on the account level by navigating to Account Setup > Setup Tools > Advance Credit toggle > Suspend/Resume Interest.