We have the principle that the repayment amount should not be greater than the outstanding debt minus the prepaid amount. The formula is below:
repayment amount | <= | outstanding debt | - | remaining prepaid amount |
no matter prepayment or partial early repayment or full early repayment | INTEREST_DUE + | minus | PREPAID |
Regarding the principle above, we can’t do the prepayment that pays the sum of the future installments' total amount, because the sum of the future installments' total amount will contain the principal and all the future interest and it’s larger than the outstanding debt.
The outstanding debt only contains the principal and accrued interest(interest from last repayment day to prepayment day).
If we do a prepayment first, then we have this amount on the PREPAID address, and after that(can be executed immediately or a few days/terms later), we do a partial or full early repayment, and our installment plan will change.
For this scenario, since we have some restrictions on the early repayment operation like we can't do the early repayment when loan is in overdue state, and early repayment will deduct the accrued interest( daily interest * days between last repayment day and the early repayment day) and part of the principal(early repayment amount - accrued interest), so at the timeline of after the early repayment , the outstanding debt only contains the PRINCIPAL amount.
However, at this point, if we find the remaining prepaid amount equals the outstanding debt, we need to use the remaining prepaid amount to pay off the loan and trigger the close loan workflow.
So at this time the remaining prepaid amount will be treated as an early repayment. And prepaid amount will no longer pay the future interest as before.
Example:
installment | interest | principal | EMI | remaining capital | |
1 | 1-2-2022 | 84.93 | 376.52 | 461.45 | 9623.48 |
2 | 1-3-2022 | 73.82 | 387.63 | 461.45 | 9235.86 |
3 | 1-4-2022 | 78.44 | 383.01 | 461.45 | 8852.85 |
4 | 1-5-2022 | 72.76 | 388.69 | 461.45 | 8464.16 |
5 | 1-6-2022 | 71.89 | 389.56 | 461.45 | 8074.60 |
6 | 1-7-2022 | 66.37 | 395.08 | 461.45 | 7679.52 |
prepayment | 20-7-2022 |
|
| 1000 |
|
7 | 1-8-2022 | 65.22 | 396.23 | 461.45 | 7283.29 |
Prepayment amount remaining | 538.55 |
| |||
8 partial/full repayment | 17-8-2022 | 31.93 | 6744.74 | 6776.67 | 538.55 |
Prepayment amount remaining | 538.55 |
| |||
9 prepayment as early repayment | 17-8-2022 | 0 | 538.55 | 538.55 | 0 |
The loan is paid off and the future installments will be invalid and won’t be shown to our customer. | |||||