Renewing a loan

Renewing is the way out when a client reaches the end of the loan (or gets halfway) and, instead of settling, wants to carry on. In a single operation, Prestafolio settles the current loan and creates a new one that carries over the principal still outstanding.

It is the flagship operation of the Open (promissory note) loan, where the client pays interest and at maturity prefers to renew rather than return the principal. But it works with any type.

What you need

• Create loans permission (loans:create): renewing is creating.
• An open cash drawer.
• An active loan (not settled, renewed or uncollectible) with at least one payment recorded: with no payments there is no principal to carry over; if you created it wrong, edit it or delete it.

The two fields that matter

Outstanding principal

What the client still owes on the current loan and that moves over to the new one. The system computes it from the loan's schedule and the sheet only shows it: it cannot be edited by hand. If the client is going to pay something, record it as a payment before renewing.

If the loan changes while the sheet is open (for example, a payment is recorded), the pending amount is no longer the one you saw. On confirming you get "This loan changed: the pending amount is no longer the one you saw. Review the updated figure and confirm the renewal again" and nothing is renewed until you confirm again.

Principal

The new cash you hand the client at renewal. It comes pre-filled with the original loan's amount, but it is normal to adjust it. It must be greater than zero.

The sheet shows the Amount to renew: new principal plus outstanding principal. That is the principal the new loan is born with and the one its schedule is computed on. It must be greater than the outstanding principal: otherwise you get "To renew, the total amount must be greater than the pending capital. Increase the new loan amount".

The remaining fields (interest, installments, type, frequency, date, weekends, arrears, grace days) belong to the new loan and you can change them all: renewal is your chance to reset the terms.

How much cash you actually need

Here is the good news: because the outstanding principal comes back into the drawer first and the amount to renew leaves afterwards, only the new principal leaves your drawer.

If you cannot cover the new principal, you get "Cash balance is not enough for the renewed loan" and nothing is renewed.

What the new loan inherits

These are kept automatically, without you asking:

• The client (you cannot switch borrower on a renewal).
• The assigned collector, if the loan had one.
• The guarantor, if it had one.

What it does not inherit: the payments. The new loan starts at zero installments paid, with its own schedule and its own projected interest, computed by the engine from the new parameters.

What happens to the old loan

It is marked Paid and Renewed, and its amount is reduced by the principal the new loan took over. It stays in your history: you can open it, see its payments and its accounting trail.

This cannot be undone. A renewed loan can no longer be edited, deleted or renewed again: you will get "Cannot renew: the loan must be active, collectible and have at least one payment" or "Cannot delete a settled or renewed loan". If you made a mistake, the path is to fix the new loan (while it has no payments) or delete it, not to resurrect the old one.

In your books

A renewal leaves two entries: one for the reintegration of the outstanding principal (it comes back from the portfolio into the cash) and another for the new loan's disbursement, identical to any loan's. Both are visible and auditable separately. See Disbursement and accounting.

Errors you may hit