Title: Message Title
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- In our use case, the interest recalculation was not taken into account.
- Regarding repayment strategies
The refund is abstractly the opposite of repayment. The order of the different components of a repayment(principal, interest, fees charge and principal charge) are reversed when making a refund.
Let's make the mifos style strategy.
For a repayment, the order is(until the amount is zero), first remove the interest portion from the amount, then the principal portion, then fees charge portion and finally the penalty charge portion.
The refund is done in the opposite direction. The order is(until the amount is zero), first remove the penalty portion from the amount, then the fees portion, then principal charge portion and finally the interest portion.
When making a refund, we sort the installment in descending order i.e. last installment first and so on. We take the last installment, undo the payments using the order above until it is fully unpaid. We then take the next inline until the amount is zero.
The accounting of these are undone accordingly in the reverse direction.
As an example, a customer takes a loan of $600 with first repayment date 01-01-2014 for 6 months i.e. repays $100 per month.
On 01-01-2014 customer pays $100
Period || Principal || Interest || Fee Charge || Penalty Charge
01-01-2014 | 60 | 25 | 10 | 5
On 01-02-2014 customer pays $210
Period Principal Interest Fee Charge Penalty Charge
01-01-2014 60 25 10 5
01-02-2014 60 25 10 5
01-03-2014 60 25 10 5
01-04-2014 0 10 0 0
Loan is overpaid in excess of $110.
Customer comes for a refund of $20
1 - Undo interest $10 of 01-04-2014
Period Principal Interest Fee Charge Penalty Charge
01-01-2014 60 25 10 5
01-02-2014 60 25 10 5
01-03-2014 60 25 5 5
01-04-2014 0 0 0 0
2 - Undo $ $5 of penalty charge and $5 of fee charges in period 01-03-2014
Period Principal Interest Fee Charge Penalty Charge
01-01-2014 60 25 10 5
01-02-2014 60 25 10 5
01-03-2014 60 25 5 0
01-04-2014 0 0 0 0
Loan is overpaid in excess of $90.
Customer comes for a refund of $80
2 - Undo $5 of fee charge $60 of principal and $15 of interest in period 01-04-2014
Period Principal Interest Fee Charge Penalty Charge
01-01-2014 60 25 10 5
01-02-2014 60 25 10 5
01-03-2014 0 10 0 0
01-04-2014 0 0 0 0
- The refund is made relative to all repayments of the loan not relative to any repayment. So it this case. The customer will be a defaulter
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