Hi Aliya,
Please see my responses below
_____
From: Aliya Walji [mailto:[EMAIL PROTECTED]
Sent: Monday, February 25, 2008 3:41 AM
To: mifos-functional@lists.sourceforge.net; Soham Dhakal
Subject: RE: [Mifos-functional] FW: New Feature Request
-LoanInterestCalc.withequal principal payment
Hi Soham,
Apologies for never responding to your updates to our discussion around the
"Declining balance - equal principal installments" feature. I know your
patch has already been submitted so it's getting a bit late for providing
feedback, however I realised that your open questions around grace period
still remain, so I wanted to address those. Our team will be reviewing your
patch on Monday. If it is accepted, then we can open bugs to address any
areas that need to change based on our discussions. Otherwise, if you have
to re-submit the patch for any reason, you can just address the changes from
this discussion in your next patch submission.
[soham] Sounds good. The patch I submitted was based on the current revision
for that date, so there will have to be some changes for the database
upgrade functionality at the very least. But i think the team there is used
to such changes. Additionally I have not changed the text of the existing
"Declining Balance" to "Declining Balance - Equal Monthly Installments"
because there were some changes to the description for all lookup values
through the configuration project.
However, I still need a "feature" added as part of the configuration project
with respect to rounding. I have emailed before on this to the developer
list. Basically I need a setting that allows me to round up if the amount is
.50 and above, and round down if its less than .50. Currently only two
settings are supported Ceiling and Floor, and i need a half up rounding.
Perhaps you can add this to the discussion during the review.
The only area I wanted to re-open from our discussions on this feature in
the past at this point is the detail around grace period. Specifically, I
noticed that in your updates to the functional spec on Mifos.org, you have
assumed that when a grace period is enabled for a loan account where the
grace type is "All repayments", the installments of grace are included in
the total number of installments (e.g. if you have a loan account with 25
installments, grace on all repayments, and 3 installments of grace, there
will be grace for 3 installments followed by 22 normal installments). The
way Mifos works is to actually not include the grace period installments in
the total number of installments. So, if you have a loan account with
weekly repayments, grace on all repayments for 3 installments and a total of
25 installments for the loan repayment, the loan will be disbursed, followed
by three weeks of grace period, followed by 25 installments of regular
repayments. Basically, when you have grace on all repayments for x
installments, the whole loan schedule is just shifted by x installments
versus the number of installments being changed. It's what you would call
"Option A" below for grace on all repayments.
[soham] After looking at the code I was able to see the current behavior of
the Grace on all (that you have described above), thus i made the coding
changes for this feature to be consistent with current behavior. What this
means is the grace functionality works similar to Declining Balance. I will
update the feature document.
In Mifos, when you have "Principal only" grace, the behavior is actually as
you specify for "Option B". The total number of installments is still the
same, but the principal only starts being paid back for the remaining
installments after the grace period is complete. So, your
spec/implementation is correct for this type of grace period and no changes
need to be made around that.
[soham] Yes.
Finally, you'd asked in your email below about what the DB settings for
'always recalculate' or 'never recalculate' interest for late/early payments
do. I suspect that they are actually DB settings that do not yet actually
affect behavior of the application. There are a few DB settings that were
never actually implemented in the application and I think this is one of
them.
[soham] It seems there was an initial thought to allow a setting to control
recalculation based on early/late payments but it might have been removed
later on..
Anyway, again, sorry for the late response on your email and spec questions.
Hopefully you'll be comfortable making the necessary changes to the spec and
implementation around grace period functionality. If you have any concerns
around this please let us know and we can address them.
[soham] No problem. Grace functionality is working consistent with declining
interest so no changes required there, but will wait for the patch review to
see if anything else comes up.
Thanks,
Aliya
_____
From: [EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED] On Behalf Of Soham
Dhakal
Sent: Wednesday, November 14, 2007 10:23 PM
To: 'Mifos functional discussions'
Subject: [Mifos-functional] FW: New Feature Request
-LoanInterestCalc.withequal principal payment
Hi Aliya,
Thanks for the feedback, and please see my response below (especially about
the grace issue, since i need some input in this from others as well).
Regards
Soham
_____
Naming of this feature in the UI
It sounds like one of the only open issues is the naming of the feature and
how it shows up in the drop down selection when you define a loan product.
I liked your suggestion about making it a subset of 'Declining balance'.
Though I don't have any finance expertise to be able to comment on how this
is typically named, my suggestion would be that the drop down has three
values in it when this feature is added:
Flat
Declining balance - equal monthly installments
Declining balance - equal principal installments
Does anyone else in the community have experience with how these two types
of calculations are typically named in the finance world? It would be nice
to get some suggestions from anyone with knowledge in this area
[soham] Yes I agree, and perhaps someone can suggest an appropriate name
Payment schedule
I notice in the example payment schedule you have provided, the Pp
(principal paid) is listed as 660 in your interest calculation. I think
this is a typo and should be 600? Or am I misunderstanding something?
[soham] yes this is a typo. It should be 600 and i will update the doc.
Interest recalculation
One thing I wanted to note is that Mifos does not recalculate interest if a
payment is missed. It doesn't seem from the design of this feature that you
expect to recalculate interest, however I wanted to be clear that a basic
assumption with this feature/functional specification is that this behavior
will not change. Can you please add this as an assumption in your
'consideration and assumptions' section?
[soham] Yes, I did make that assumption. But one thing that confused me,
and perhaps someone can clarify, in the database there is a setting to
"Always recalculate" or "Never Recalculate" for late/early payments and the
manual (from June 2006) also mentions this functionality. Was this removed?
So if a client makes a payment that is more than the scheduled principal the
interest for the next cycle will not reflect it then? or how is this
handled?
------
Grace periods functionality
In your spec you mention that grace functionality would be applied to this
type of interest. I think the 'grace on all payments' behavior is straight
forward. Can you give an example of what the repayments would look like if
the loan account is created with 'principal only' grace? I think this is
still relatively straight forward (still follows the formula in the same
way) but I want to be sure that there's an explicit example so there's no
confusion. Could you add this in?
[soham] I thought this was straightforward, but come to think of it i have
some questions around how it should be handled. CSD or SBB do not use grace
at all so perhaps others can suggest , or completely not allow?.
The question is,does applying grace mean that the number of payments is
reduced and will have higher principal? or the principal will still be
divided over the term, and the first payment (after grace) includes the
addition of previous (grace) payments?
here are some examples to explain it better
Principal - 15000, Nbr of payments - 25, IR - 25%, Grace Period - 3
CASE 1: Graceon All payments
Option A: EPI = (15000/25) = 600.Thus the payment schdule for the 4th
payment would be (4*600) 2400, and the remaining payments (principal) would
all be 600. The interest would be calculated by the formula as mentioned in
the feature doc.
Option B: No Principal or interest due on the first 3 payments. EPI =
15000/(25-3)=681.82. So the remaining 22 payments would all have princpal
681.82 and interest would be calculated based on number of days for the
remaining principal for each of the installments.
CASE 2: Principal only Grace
Option A: EPI = 600. There would be no principal due on the first 3
payments, but the interest due would be (15,000 - 0)*0.25*14/365 =
143.83for each of the 3 payments. Again the 4th payment would have principal
due of (4*600) =2400, and the remaining payments (principal) would all be
600. The interest would be calculated by the formula as mentioned in the
feature doc
Option B: There would be no principal due on the first 3 payments, but the
interest due would be 143.83 for each of the 3 payments. EPI =
15000/(25-3)=681.82. So the remaining 22 payments would all have princpal
681.82 and interest would be calculated based on number of days for the
remaining principal for each of the installments.
I am leaning to option B, but looking for others feedback as to what would
make more sense
Principal due on last installment
If the user selects this option and the calculation becomes the same as the
existing 'declining balance' interest rate type, do you think we should
disable the checkbox from being selected? This isn't a suggestion, but
really a question. I'm not sure what is better from a user perspective but
I'm leaning towards disabling that functionality (graying out the checkbox
and making it unselectable) so that it's clear that it will not result in
equal principal installments (because no principal is actually being paid
per installment). What do you think?
[soham] I agree with you that this check box should be disabled for this
type of calculation.
Anyway, let me know your thoughts on the above feedback. Thanks again for
putting together a clear specification and getting it up on the wiki for us
quickly. Thanks also for your patience in waiting for feedback from me.
Regards,
Aliya
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