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.
• A loan that is not already settled or renewed.

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 form pre-fills it with the current installment's balance, but you can change it, for instance if the client pays some cash at renewal time.

It cannot be greater than the current loan's amount: try it and you get "The outstanding principal exceeds the loan's current balance".

New loan principal

How much the client will owe from now on. It comes pre-filled with the original loan's amount, but it is normal to adjust it:

• Equal to the outstanding principal → a pure rollover: no cash in, no cash out, you simply rewrite the term and the rate.
• Greater than the outstanding principal → you lend more: the difference leaves your drawer and goes to the client.
• Less than the outstanding principal → the client paid part at renewal: the difference comes into your drawer.

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 new disbursement leaves afterwards, you only need the difference in cash.

If you cannot cover the difference, 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 "This loan cannot be renewed" 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