Arrears, penalties and fees

When a loan is in arrears

A loan is in arrears when the client has paid less than the repayment schedule has asked for so far. The system checks every active loan once a day, and again each time a collection is recorded. You do not need to mark missed days yourself.

• If the client is up to date, any earlier arrears on the loan are cleared.
• If the client is behind, the loan is listed on the Delinquency screen with its current days in arrears.

Days in arrears

Days in arrears is the number of days since disbursement, minus the number of full instalments the client has paid. For example, 10 days after disbursement a client who has paid the equivalent of 7 full instalments is 3 days in arrears.

Only payments towards the schedule count. Money that went to penalties, fees or savings does not reduce the days in arrears.

Penalties

Depending on your organisation's settings, a late-payment penalty is charged for each day a loan is behind. Typically the penalty is a percentage of one day's instalment for each day late.

• A part-payment still counts as a day behind. A client who pays half the instalment is charged the same day's penalty as one who pays nothing.
• The penalty does not grow with the backlog. It is based on one instalment, not on the whole amount owed.
• Grace days. Your organisation may allow a number of grace days. While a loan is no more than that many days behind, no penalty is charged, but the loan still shows as in arrears on the Delinquency screen.
• Penalties are added to the loan. They increase the loan's Outstanding balance and are paid first out of the next collection. See How payments are applied.

Some organisations do not charge penalties at all.

The Delinquency screen

Small Loans > Delinquency has two tabs: Delinquent Loans and PAR Report.

Delinquent Loans

Lists every active loan that is in arrears, with the largest arrears first.

Column	Meaning
Client	The client's name, with their client number underneath.
Loan	The loan reference.
Outstanding	The full balance still owed on the loan.
Days in Arrears	How far behind the loan is.
PAR Category	The arrears band the loan falls in.
Actions	Select the eye icon (View arrears detail) to open the loan on its Arrears tab.

Use the PAR Category filter to show one band at a time:

Band	Days in arrears
PAR 1-29	1 to 29
PAR 30-59	30 to 59
PAR 60-89	60 to 89
PAR 90-179	90 to 179
PAR 180+	180 or more

PAR Report

PAR (portfolio at risk) measures how much of the money lent out is in loans that are behind.

• Total Portfolio - the total outstanding on all active loans.
• Total Delinquent - the total outstanding on loans that are in arrears.
• Delinquent Loans - how many loans are in arrears.

The PAR Breakdown table splits the portfolio into Current (up to date), PAR 1-30, PAR 31-60, PAR 61-90 and PAR 90+, with the # Loans, Amount and % of Portfolio for each.

The Amount for a band is the whole outstanding balance of the loans in it, not just the overdue part. That is the usual way to measure portfolio at risk: once a loan is behind, the whole balance is at risk.

The PAR Trend chart shows, for each of the last six months, the share of active loans that were more than 30, 60 and 90 days behind at some point in that month (lines PAR 30, PAR 60 and PAR 90).

note

The two tabs group loans slightly differently. A loan exactly 30 days in arrears is in PAR 30-59 on the Delinquent Loans tab, but in PAR 1-30 on the PAR Report. The same applies at 60 and 90 days.

The Arrears tab on a loan

Open a loan and select the Arrears tab (or use View arrears detail on the Delinquency screen).

• Accumulated Penalties shows the Penalty Rate, the Accumulated Penalty (penalties charged and not yet paid) and Last Calculated (the date of the most recent arrears check).
• Missed Payments lists each arrears check on the loan, with the Due Date (the date of the check), the Amount the loan was behind on that date, and the Days Overdue.

caution

The Missed Payments table is a history: each row shows how far behind the loan was on that date, including checks that have since been cleared. The most recent row is the current position. Do not add the rows together, and do not rely on the Total shown above the table, which adds them up and so overstates what is owed. For the instalments still unpaid, use the Overdue and Partial rows on the loan's Schedule tab.

Fees and unpaid fees

Depending on your organisation's settings, clients may be charged:

• a registration fee when they are first registered;
• a Small Loans enrollment fee each time a loan is disbursed;
• an account maintenance fee at regular intervals;
• a per-transaction fee each time a collection is recorded.

These are set by an administrator under Settings > Account Creation; see Administration. When a fee is charged, it is either left as an amount the client owes or taken from the client's savings, depending on the Take fees from setting.

How unpaid fees affect loans

Under Unpaid fees an administrator can choose:

• Take unpaid fees out of a collection first - unpaid fees are taken from each collection before penalties, interest and principal. A client who owes a fee and pays their full instalment will therefore fall behind by the amount of the fee.
• Refuse new loans to clients who owe fees - a client who owes a blocking fee (such as a registration or enrollment fee) cannot get a loan until it is paid. Refuse at sets the first step where the block applies: Application, Approval or Disbursement. The block then applies at that step and every step after it. Ignore amounts up to lets a very small remainder through, so a rounding difference cannot stop a loan.

When a client is blocked, staff see: "This client owes ... in unpaid fees. Record the payment before continuing with the loan." Rejecting an application is never blocked.

Another loan while in arrears

Your organisation may also refuse a new application from a client whose existing loan is more than a set number of days in arrears. The message names the loan: "Loan SL-...-L is ... days in arrears. Bring it up to date before applying for another loan." See Applying for a loan.

What you can do about a loan in arrears

The way to bring a loan back up to date is to collect the missed instalments plus any penalties. Record the payment as a normal collection; the system clears the oldest missed instalments first. See Recording collections.

For reports across the whole branch, see Reports and cash.