What: Support a new option for interest calculation on dynamic loans, that would be based on the net balance between the loan account and a designated “offset” deposit account.
The daily amount of accrued interest would be calculated as follows:
Daily interest rate (%)
* (outstanding loan principal balance
- (minus) offset deposit account balance)
Why: With this setup, organisations can give a client the benefit of recalculating the interest on a lower outstanding balance when a pre-payment is made and at the same time allow the client to:
- withdraw the balance from the deposit account if needed (also known as “re-drawals”)
- track the pre-payments amount on a separate account
- do not expect the client to pay the interest/other dues on the instalment due dates if settlement accounts functionality is used
This is commonly known as an “offset” accounts and typically used by organisations offering mortgage loans.