Settling a loan
The payoff: closing the loan in one shot by paying the outstanding principal. Which amount goes in each field and why.
When a client wants to pay the loan off in full before the schedule ends, do not collect installment by installment: use Settle loan (payoff) in the collection form on the loan detail screen.
The payoff closes the loan in one operation: it marks every installment as paid, leaves it settled, and credits the money to the drawer.
Like any collection, it requires an open cash drawer.
The rule to understand
The form has two amounts and they do not mean the same thing:
- Outstanding principal (internal field
amount): the system computes and sends it for you. It must match exactly the principal the client still owes. If it does not, the collection is rejected ("The payoff principal does not match the outstanding balance"). - Total: what the client actually pays. It is proposed as outstanding principal + current period interest, but it is editable: this is where your negotiation lands.
The only condition on the Total is that it cannot be lower than the outstanding principal ("The payoff total cannot be lower than the outstanding principal"). You may waive interest, never principal.
Anything above the principal is recognised ENTIRELY as interest (profit). It is not a "discount" or a "tip": the system books interest = total − outstanding principal. That is the rule that keeps the ledger balanced.A worked example
A loan with RD$32,000 of outstanding principal and RD$800 of interest in the current period. The client wants to close today.
Scenario | Principal (fixed) | Total you charge | Interest recognised | Drawer |
|---|---|---|---|---|
Charge the current installment and close | 32,000 | 32,800 | 800 | +32,800 |
Waive the interest | 32,000 | 32,000 | 0 | +32,000 |
Charge interest plus an agreed fee | 32,000 | 33,500 | 1,500 | +33,500 |
Try to charge less than the principal | 32,000 | 31,000 | N/A | rejected |
If there are arrears too, they go in their own field (Arrears) and are added to the total; they are never deducted from it. See How arrears are calculated.
In the ledger the payoff is recorded like any collection: debit Cash for what was received, against Loan Portfolio for the principal (32,000), Interest Income for the excess and Penalty Income for the arrears collected.
If the installment already had partial payments
The payoff folds ongoing partials in. The Total you send is what is left, not the full figure: the form already subtracts it for you.
With outstanding principal 32,000, interest 800 and an ongoing partial of 500:
- Proposed total: 32,300 (32,000 + 800 − 500).
- On save, the system adds the partial back: 32,800 enter the drawer.
- The principal (32,000) is never netted against the partial: it is validated 1:1 against the outstanding principal.
Open-interest loans (openLoan)
An open-interest loan has no closed schedule: periodic interest is collected and the principal is settled whenever the client can. Here the payoff triggers itself: as soon as the principal you collect meets or exceeds the outstanding balance, the loan is settled without you toggling anything.
After the payoff
- The loan is settled (
paid) and takes no further payments: any attempt returns "The loan is already settled". - It frees an active-loan slot against your plan limits.
- Made a mistake? A payoff can be reversed like any payment, and the loan becomes active again. See Reversing a payment.