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Description:
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High level requirements for Home Loans (based on inputs from GK)
Home Loans like other loans may be restricted to customers of certain specific offices or could be given to customers of all office.
At the time of creation the applied for amount is fixed and during approval of the loan the sanctioned amount are fixed. This is the max amount to which the loan can be disbursed. For example, the customer may apply for 125,000, the sanctioned amount may be 110,000 and the actual disbursement may be 100,000.
At the time of creation and approval of the loan product the following parameters may be set:
- Disburse in multiple tranches - Yes/No
- Align disbursement to meeting dates? Yes/No --> If yes, then disbursement can be done only on a meeting day
- Align repayments to meeting dates? Yes/No --> If yes, then repayment schedule will be generated for meeting days only
if not, then specify dates for installments and repayments (15th of every month, 2nd Tuesday of every month etc., weekly on Tuesdays etc.)
- Date on which interest is calculated:
As on a specific date (31st of every month)
As on a specific date in relation to the meeting date (on the date of the meeting, one day/week prior to meeting etc.)
As per calendar - 1st of every month, last day the month, 1st day of the week etc.
- If prepayments are allowed (Yes/No)
If yes, then will there be any additional penalties/charges on prepayment (Yes/No)
If yes, then how the penalty/charges are calculated (flat or %age of pre-paid amount)
(For first development cycle, we can assume that prepayments are allowed without any additional charges / penalties. The other options may be developed in future)
- If advance installments may be paid? (Yes/No)
If yes, then will the "interest be recalculated to benefit customer for pre-payment" (Yes/No)
- If top-up is allowed during the tenure of the loan - (Yes/ No) (for first development cycle, we can assume that this will be set to No)
- Interest compounded in case of defaults - Yes/No --> if yes, then any overdue interest is added to the outstanding principal when calculating next installment's interest.
Home loans may be disbursed as a single disbursement or in multiple disbursements (in multiple tranches). At the time of creation of the loan and at the time of approval, the exact number of tranches may not be known.
Till all the tranches are disbursed, the repayments may be given a principal-only moratorium (i.e. only interest on the disbursed amount is to be paid by customer)
After full loan in disbursed (i.e. all tranches are disbursed), the Equated Instalments (with both principal and interest) kicks in. So at the time of doing disbursement, it should be possible to specify if the disbursement is the final disbursement or not and the date of commencement of the 1st installment.
Interest-only payments (during moratorium) is calculated based on actual daily outstanding:
Example: Date of calculation of interest is 30th of every month.
On April 14 disbursement of 50,000/-, next repayment falls on 15th May - then interest due on 15th May is calcualted from 14th April till 30th April for 50,000
Interest on equated installments is calcualted based on actual daily outstanding:
Example: Repayments are made 1th of every month and interest is calculated on 30th of the previous month. Interest is 22%
1st of August oustanding: 100,000
15th August installment received out of which 1,134 was applied to principal
15th Sep - interest due amount is as follows
(100,000 * 22% * 14days / 365) + (98,866 * 22% * 17days / 365)
Part Pre-payments:
Customer may make a pre-payment either as a pre-payment or as installment(s) in advance.
When making the pre-payment, the user will specify if the pre-payment is a "pre-payment" or an "installment paid in advance".
Pre-payment will reduce the principal oustanding and all future re-payments continue as per the schedule
For "installment paid in advance", then entire amount is assigned to the future repayments and the future repayments are marked as received and even if customer does not make these payments on the specified dates, the loan will remain as "active in good standing". If "interest be recalculated to benefit customer for pre-payment" is set for this loan product, then the interest is recomputed for the future installments to give benefit to customer for the pre-payment.
When making pre-payments, customer may choose to:
a) Leave installment amount as the same, thereby reducing the tenure of the loan
b) Reduce the installment amount, and leave the tenure unchanged
c) Reduce the installment amount and reduce the tenure of the loan
Full pre-payment / pre-closure:
The entire outstanding amount may be prepaid by customer without any additional penalties or charges
Part-Payments
Part payments are allowed. And amount will be applied as per payment rules (for example: interest first and then if any amount is remaining, then applied to principal)
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