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From "Adi Raju" <adi.r...@confluxtechnologies.com>
Subject RE: Issues in interest recalculation
Date Wed, 07 Dec 2016 10:20:21 GMT
Hi Sander,

Interest recalculation is allowed only when "Calculate interest for exact days in partial
period" is enabled in product definition.
Consider the scenario: holidays calendar is empty, all days are considered working days and
payments are always on time, you will see the interest applied equally with interest rate
1% considering 12%pa interest with monthly payment period.

In case there is any date difference due to holidays/working days consideration or early payments
etc, the calculation happens as follows:
Assume installment is falling on 1st Feb, but due to holiday the installment is postponed
to 2nd Feb and consider 12%pa interest rate.
Interest for the whole month of Jan is calculated at 1% and interest for the 1 additional
day in Feb is calculated as 1%*(1/28).
For the installment on 1st Mar, interest is calculated as 1%*(27/28) would be used.
This is how the current interest recalculation happens to make sure the interest is collected
for each and every day. 
And partial interest for any day is calculated based on the number of days in the loan installment
period.

I am unable to reproduce other issues that you have mentioned. Looks like they are linked
to some other factors as well. If you can reproduce them on demo.openmf.org and provide with
loan ids or relevant details, we can get back with clarifications or verify if it is really
a bug.

Regards,
Adi Raju

Principal Architect, Conflux Technologies Pvt Ltd
Address: #304, 2nd Floor, 7th Main Road, HRBR Layout 1st Block, Bengaluru, Karnataka, 560043
INDIA


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-----Original Message-----
From: Sander van der Heyden [mailto:sandervanderheyden@musonisystem.com] 
Sent: 05 December 2016 17:06
To: dev@fineract.incubator.apache.org; A good place to start for users or folks new to Mifos.
Subject: Issues in interest recalculation

Hi All,

We've been doing a relatively extensive round of testing on interest recalculation loans and
found the following issues (on demo.openmf.org).
All of the cases below have:
- Interest recalculation on
- Interest calculation = same as repayment period
- Amortization set to Equal instalments
- Advance payments set to Reduce EMI Amount
- No grace periods
- No sliding interest rates, or multi-disbursements
- No fixed EMI amounts

I've not yet created JIRA items on it, because I was wondering whether other people had seen
these and there was a work-around by specifying the right params? Also when trying to debug
some of this I think the calculations have now been made so incredibly complex that it is
very hard to fix some of these without creating other bugs in exchange.

*Daily interest on Same as Repayment period* On monthly loans, even though same as repayment
period is selected, the interest calculation seems to happen on a daily basis. We see jumps
up and down in the schedule, which should not happen especially before any payments are made,
as in that case the interest calculation should be identical for each month (we are using
same as repayment period) and therefore the interest amount should always drop month over
month, with principal going up.

*Incorrect interest in Loan Schedule for first instalment when making an early payment* When
setting up any interest recalculation loan, and making an early payment on the first instalment,
this updates the schedule with all of it going to principal, leaving the interest outstanding.
However the actual transaction does split part of it to interest and so does the loan summary.
In subsequent instalments this no longer happens.

*Interest recalculation causes incorrect schedule with duplicate
instalments*
On a daily loan, when an installment was originally due on a weekend day, it get's pushed
forward, skipping that day correctly. However in recalculation this is no longer happening
therefore introducing 2 installments on the same date one with a 0 length. So what happens
is pre-correction you have an instalment on the 3rd of December, then one on the 5th (skipping
sunday). After the payment and recalculation it has 2 instalments due on the 5th, one with
0 days and no interest.

*Single instalment loans do not recalculate* When a loan with 1 instalment is created and
the client prepays on that one instalment, interest is not recalculated.

*Early payment of all principal throws an EMI error* When repaying the full principal due
on the loan in an early instalment it throws an EMI error, which should not happen, there
is still a bit of interest to pay, but no more principal. This means the schedule should just
show that interest remaining (or close the loan as there is no interest).


Thanks,
Sander


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