What: An option to “Terminate” a loan account. When a loan account is “Terminated”, all the amounts not yet due should become due immediately (as of the Termination Date).
Why: Termination process is often used in the below scenarios:
When the loan account reaches a certain number of Days in Arrears/ Days Late (e.g. the repayment is late for 90 days). Since no more payments are expected on the account, the schedule is terminated and the total outstanding principal plus all accrued charges become due.
In case of a detected fraud - the customer has to repay all the due amounts immediately, the original schedule is no longer applicable and a different interest rate is applied.
See example below:
Repayment schedule before loan account is Terminated
Repayment Schedule after the loan account is Terminated on 30.06.2017 (when the Days Late count is 90 days)