Ideas for the Mambu Banking Engine

Schedule recalculation in a situation of negative principal error at loan account origination - Dynamic EMI Optimised loans

What: Recalculate a loan account's schedule in a situation of the negative principal error at loan account origination for Dynamic EMI Optimised loans.

Since this situation can only occur in the scenario when installment due dates are moved due to holidays settings (ahead to the next/ backwards to the previous working day), the proposed solution would be the following:

  1. Calculate the schedule when the installment due dates are moved ahead to the next/ backwards to the previous working day in the "Non Working Days Rescheduling" setup

  2. Identify the earliest installment that returns a "negative principal error"

  3. Calculate the schedule when the installment due dates are not moved (i.e. "Non Working Days Rescheduling" = "Do not reschedule repayments" (since the schedule is optimised, there shouldn't be any installments with negative principal errors)

  4. For installment identified in step 2 - replace the expected principal amount with the expected principal amount calculated in step 3.

  5. Adjust the calculations of the following installments accordingly and identify the earliest installment that returns a "negative principal error"

  6. For installment identified in step 5 - replace the expected principal amount with the expected principal amount calculated in step 3.

  7. Continue until there are no installments with negative principal.

An alternative approach would be to exclude the "iterations" of the schedule and take the following steps - preferred option:

  1. Calculate the schedule when the installment due dates are moved ahead to the next/ backwards to the previous working day in the "Non Working Days Rescheduling" setup

  2. Identify the all the installments that return a "negative principal error"

  3. Calculate the schedule when the installment due dates are not moved (i.e. "Non Working Days Rescheduling" = "Do not reschedule repayments" (since the schedule is optimised, there shouldn't be any installments with negative principal errors)

  4. For installments identified in step 2 - replace the expected principal amount with the expected principal amount calculated in step 3.

Why: To allow tenants that have in their offer loans that are a combination of a high interest rate, small loan amount and long maturity to still issue their offer to the market, instead of imposing adjustments in the loan account terms.

  • Dorota Nosal
  • Sep 24 2019
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