In both installment loans and line of credit accounts, a credit is a transaction that reduces the borrower's balance. The reason may vary—an incentive for borrowers to repay the rest of the balance, a correction to a mistake, or even just a gesture of goodwill—but the process will be the same. This article will explain how credits work and show you how to log one in LoanPro’s LMS.

Log a credit on an installment loan

To log a credit on a loan, navigate to Account Setup > Setup Tools inside the loan account. Make sure you are on the Advance/Credit > Credits tab inside the Setup Tools. Note that this tool is only available if the loan is activated.

Click ‘Add’ to log a new credit. This will display a pop-up window with a questionnaire to log the credit and ensure that it is the best option for you. The questions are as follows:

• What is the reason/category for this credit? Select a credit category from the dropdown provided. If you don’t see an applicable reason/category, you can add one.
• Please enter a description/title for this credit. The title should distinguish this from other credits on the account.
• Please enter the credit amount. Enter a dollar amount for the credit.
• On which date should this credit apply? Enter the date that the credit will apply to the loan.
• In what order should the credit apply to the components of the loan (e.g. interest, principal, fees)? You can choose a payment application from the dropdown. If you don’t see the payment application you want, you can create one.
• Do you want this credit to apply as a charge off (choosing ‘Yes’ will have credit reporting consequences)? Choose whether this credit will apply as a charge-off. Remember that a charge-off is an amount that you have deemed non-collectable on the loan. If there is a net charge-off, the loan will be set to report as a charged-off loan if you are reporting to the credit bureaus.
• In addition to applying this credit to the account, do you ALSO want to reset the days & amount past due on the date the credit applies? If you choose ‘Yes’ here, the loan will be set to 0 days past due with a past-due balance of $0.00 on the day the credit applies.

Payoff using credits

You can use credits to pay off a loan. To do this, choose the waterfall application ‘Payoff’. This will populate the amount with today's payoff amount and the date with today's date. When you log the credit, it will bring the loan payoff to $0.00.

Once you have entered all of the necessary information for the credit, click 'Next'. You can now view a summary of the credit that you are logging.

Selecting the magnifying glass icon will allow you to get the payoff amount by date.
Once you have entered all of the necessary information for the credit, click 'Next'. You can now view a summary of the credit that you are logging. Click 'Save' to save the credit.

Logging a credit on a line of credit account

In order to log a credit on a line of credit, navigate to Line of Credit > select a line of credit account > click the blue ‘Log’ button > Credit. After selecting this option, a new screen will pop up.

Here's a breakdown of each field:

• Title: Indicates why the credit was given.
• Date: Date on which credit is applied. You can choose any date after the start of the current period.
• Amount: Dollar amount of the credit.
• Category: Type of credit being applied (e.g. adjustment, forgive balance, etc.). These are customizable labels, so your options will depend on your own configuration. 
• Application type: Determines how the credit applies to the balance, such as which buckets and which components get priority. These are customizable at the tenant level, and share a list with Payment Application Waterfalls. 

Once all of the required information has been added, click 'Save' at the bottom right corner of the screen and the credit will be applied. Afterward, you'll see the credit appear on the account summary with the rest of your transactions.