Payoff, close, and renewal
This article explains how to pay off, renew, and close a loan, including the process for managing a non-performing loan.
Payoff a loan
You can pay off a loan from either the ‘Summary’ tab or ‘Payments’ tab within a loan.
Start from the ‘Summary’ tab
To initiate payoff,
- Scroll down within the ‘Summary’ page of a loan to find the ‘Payoff Breakdown’ section.
- If you know the date you want to use for the payoff of the loan, enter it into the ‘Payoff Date’ field. This field defaults to today’s date if nothing is selected. A pie chart indicating principal, interest, and escrow due will automatically generate.
- Click
to show ten days worth of payoff numbers starting on the date entered in the ‘Payoff Date’ field. Choose to pay off the loan on one of these dates by clicking in the correct row. This will load the payoff date and amount into the payment page and mark the payment as a payoff payment.
Start from the ‘Payments’ tab
You can also pay off a loan via the ‘Payments’ tab. To use this method,
- Navigate to Servicing > Payments inside a loan.
- Click 'Log Payment' to be taken to the payment page.
- Select ‘Payoff’ from the ‘Type of Payment’ dropdown menu to specify the payment as a payoff.
- Once you have selected ‘Payoff’, the ‘Amount’ field will default to the payoff amount for the date entered in the ‘Date’ field.
Note that if the ‘Date’ field is changed after the ‘Amount’ field has been populated, the amount will not automatically update to the calculated payoff amount for that date. If you would like to change the amount, you can manually change it, or select the current date payoff amount from the ‘QuickPay’ dropdown. - You can also lookup payoff amounts by clicking the search icon near the ‘Amount’ field. This will open a window that will let you choose a payoff date and amount.
Once the payment has been set as a payoff payment and the amount and date are correct, simply continue to log the payoff payment like you would any other payment. A payoff payment is unique because it will pay everything outstanding on a loan. If the date you chose for the payoff is after today’s date, the loan balance will not be $0.00 until that date.
If the amount entered into the ‘Amount’ field is different from the calculated payoff amount for the ‘Date’ selected, the difference between the two values must be accounted for in order to bring the account balance to zero. When navigating the ‘Preview & Confirm’ tab, a dialog box will pop up that will ask you how to apply the difference. It will give you the appropriate options based on whether the amount you entered is more or less than the calculated payoff amount.
If the amount you entered is less than the calculated payoff for the date entered, you will be given the option to apply the difference either as a credit, or you will have the option to make the credit a charge-off. If you choose to charge off the credit, use the ‘Mark Credit As ChargeOff’ drop-down. Choose a category for the credit from the ‘Category’ dropdown.
If the amount you entered is more than the calculated payoff for the date entered, you will be given the option to make up the difference by either applying an advancement or a charge to the loan. The payoff payment will then apply to the total outstanding amount on the loan, including this charge or advancement. If you choose to make up the difference through an advancement, you will have the option to select a category for the advancement from the ‘Category’ dropdown.
Closing a loan
Most of the process in closing a loan will consist of policies and procedures that your company has put in place. For non-performing loans, you may want to close them before they have been paid off. In this situation, you would charge off the loan.
If a loan has a $0.00 balance, interest will no longer accrue, late fees will no longer be assessed, and AutoPays will no longer run. If your closed loan does not have a $0.00 balance, interest will continue to accrue. If processing an AutoPay will take the loan balance negative, AutoPays won’t process. If you don’t want to pay off or charge off the loan, but you want to close it, you can stop interest accrual, late fees, and AutoPays manually.
When you close a loan, usually you will change the status of the loan. This can be done by navigating to Loan Settings > Settings inside the loan account. Click 'Edit'. Choose the new account status and/or sub-status from the Loan Status and Sub-Status drop-downs respectively. These lists can be customized by navigating to Settings > Loan > Labeling > Loan Status.
If you give collateralized loans, it’s possible that you are closing the loan after a repossession has occurred. If that is the case, you may want to enter the date you sold the repossessed collateral into the ‘Liquidation date’ field. Otherwise, enter the date the loan will be closed (probably today’s date) into the ‘Closed Date’ field. Click 'Save' to save the settings changes.
Credit reporting
After a loan is closed, usually the loan will still be reported to credit for some amount of time. This will ensure that the credit bureaus get notified that the loan has been paid off or charged off so that the borrower’s credit data is accurate. There is no standard for the amount of time to continue to report a closed loan. We recommend you continue to report it for 90 days. If you are using LoanPro’s credit reporting, the best way to ensure that this happens is to modify your export rules in the ‘Credit Reporting’ tool.
To change the export rules for credit reporting, select ‘Credit Report’ from the ‘Data Options’ on the ‘Account Manager’ page. Click to expand the export rules section.
Enter the number of days you want to continue to report closed loans into the ‘Cutoff Days’ field. (We recommend continuing to report closed loans for 90 days.) This should take care of credit reporting for closed loans.
Renewing a loan
Many types of loans, such as payday loans, get renewed on a regular basis. This process steps you through the different options you can set when renewing a loan so that you do not have to create a brand new loan, allowing you to keep all of the history for the account.
To start the renewal process, open up the target loan and navigate to Account Setup > Processes. Click ‘Loan Renewal’. The following steps will include Credit/Advancement, Past Due Reset, Change Next Due Date, and Roll Schedule.
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Credit/Advancement: Enter the renewal loan amount (new loan amount) in the ‘New Amount’ field. Below this field you will see ‘Calculated Amount’ and an ‘Adjustment Type’ fields. The system will calculate any adjusting transaction necessary to update the loan amount to the amount you entered as the new amount. Click the amount to autofill the ‘Amount’ field for either an advancement or credit, whichever is appropriate. Choose a category for the advancement or credit. Click ‘Next’.
In the case of a credit, you can also choose the application and whether to reset the amount & days past due when the credit is logged. Since you are renewing the loan, this is done by default. The application will usually be principal since the point of adding a credit is to adjust the principal balance.
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Past due reset: Select the ‘Days Past Due’ and ’Amount Past Due’ options for the account.
- Days past due: Enter a date on which the days past due on the account will be reset to 0. This will likely be the same as the renewal date.
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Amount past due: Enter a date on which the amount past due on the loan will be adjusted to either $0.00 or a fixed dollar amount. This will most likely be the same as the renewal date on the loan. Choose whether the account will be adjusted to a zero balance or to a fixed dollar amount past due from the ‘Type Of Adjustment’ dropdown. If you chose ‘Fixed Dollar Amount’ from the ‘Type Of Adjustment’ dropdown, enter the amount in the ‘Amount’ field. Click ‘Next’.
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Change next due date: Choose a new schedule line beginning due date and the next due date from the first two drop-downs. If you want to charge the borrower a fee to change the due date, choose ‘Yes’ from the ‘Charge Fee’ dropdown. Click to save the change of due date. You can then determine the amount, additional fees, and add a memo. Once done, click ‘Save’ to confirm.
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Roll schedule: You have the option to enter a simple payment schedule or a full payment schedule. If you want to roll the payment schedule, enter the term, the rate, and the amount for the new payment schedule.
Once you are done, click ‘Save’ to save your changes to the loan.
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