Loan & Lease Initiation

When initiating a loan or lease agreement, several financial calculations and checks are typically performed to ensure affordability. Loan and lease initiation includes:

• Affordability Checks to assess amount of financed amount and down payment.

• Rental Calculation to determine the monthly or periodic lease payment.

• Calculate Rate calculates the interest rate and helps to determine the cost of borrowing.

• Step Rental is used to to calculate rental payments where the lease payments increase or decrease at predefined intervals during the lease term.

Affordability Checks

When applying for a loan or lease, lenders or lessors typically conduct affordability checks to determine how much a borrower can borrow and the upfront amount needed to pay. These checks involve assessing various factors to ensure that a borrower can afford the financial commitment. These checks are conducted to ensure that borrower can comfortably afford the loan or lease payments without facing financial hardship. Affordability Checks includes:

• How much can I borrow calculates the reverse finance amount.

• How much I need to pay upfront ascertains reverse down payment.

How Much can I Borrow?

How much can I borrow is used to calculate the financed amount i.e. the amount a borrower can borrow. Financed amount calculation can be parametrized on the basis of repayment mode, repayment frequency, contract duration in months, interest rate, residual value, upfront payment and periodic repayment amount.

How Much can I Borrow?

1. Repayment Mode refers to how the repayments on a loan or credit agreement are structured. Two common repayment modes are "advance" and "arrears."

   • Advance Repayment Mode: In advance repayment mode, the borrower makes the payment at the beginning of the specified period. For example, if you have a monthly repayment schedule and the repayment mode is set to advance, you would make the payment at the start of each month. This means that the payment covers the upcoming period of time.

   • Arrears Repayment Mode: In arrears repayment mode, the borrower makes the payment at the end of the specified period. Using the same example of a monthly repayment schedule, if the repayment mode is set to arrears, you would make the payment at the end of each month, after the period has elapsed.

2. Repayment Frequency refers to how often you make repayments on a loan or credit agreement. The frequency can vary depending on the terms of the agreement and the preferences of the lender and borrower. Repayment frequency options include weekly, fortnightly, monthly, quarterly, semi-annually and annually.

   • Weekly: Repayments are made on a weekly basis, with 52 payments in a year.

   • Fortnightly: Repayments are made every two weeks, resulting in 26 payments in a year.

   • Monthly: Repayments are made once a month, with 12 payments in a year.

   • Quarterly: Repayments are made every three months, resulting in four payments in a year.

   • Semi-annually: Repayments are made twice a year, with two payments in a year.

   • Annually: Repayments are made once a year, resulting in a single payment in a year.

3. The Contract Duration in Months refers to the length of time for which a loan or credit agreement is valid. It represents the agreed-upon period during which repayments will be made until the loan is fully paid off or the credit agreement is fulfilled. The contract duration can vary depending on the type of loan, the lender's terms, and the borrower's preferences. For example, a common contract duration for a personal loan or a car loan could be 12 months, 24 months, 36 months, or longer.

4. Interest Rate is a percentage that represents the cost of borrowing funds from a lender. It is applied to the principal amount of a loan or credit agreement. The interest rate is one of the key factors that determine the total cost of borrowing and influences the amount of interest you will pay over the loan term.

5. Residual Value refers to the estimated value of an asset at the end of its useful life or lease term. It is commonly used in leasing or financing agreements, particularly for assets such as vehicles, equipment, or real estate.

6. Upfront Payment refers to a payment made upfront by a buyer to a seller or lender when purchasing a product, property, or securing a loan. It is typically a percentage of the total purchase price or loan amount.

7. Periodic Repayment Amount refers to the amount of money that a borrower is required to pay at regular intervals to repay a loan or credit agreement. It is the fixed payment made by the borrower to the lender on a recurring basis, typically monthly, but it can also be weekly, biweekly, or quarterly depending on the terms of the loan.

8. Click on Calculate button to view How much I can Borrow amount.

How Much I Need to Pay Upfront?

How much I need to pay upfront is used to calculate the down payment i.e. the amount a borrower needs to pay upfront. Down Payment amount calculation can be parametrized on the basis of payment mode, payment frequency, contract duration in months, interest rate, residual value, lending amount and periodic repayment amount.

How Much I Need to Pay Upfront?

1. Payment Mode refers to how the payments on a loan or credit agreement are structured. Two common payment modes are "advance" and "arrears."

   • Advance Payment Mode: In advance payment mode, the borrower makes the payment at the beginning of the specified period. For example, if you have a monthly payment schedule and the payment mode is set to advance, you would make the payment at the start of each month. This means that the payment covers the upcoming period of time.

   • Arrears Payment Mode: In arrears payment mode, the borrower makes the payment at the end of the specified period. Using the same example of a monthly payment schedule, if the payment mode is set to arrears, you would make the payment at the end of each month, after the period has elapsed.

2. Payment Frequency refers to how often you make payments on a loan or credit agreement. The frequency can vary depending on the terms of the agreement and the preferences of the lender and borrower. Payment frequency options include weekly, fortnightly, monthly, quarterly, semi-annually and annually.

   • Weekly: Payments are made on a weekly basis, with 52 payments in a year.

   • Fortnightly: Payments are made every two weeks, resulting in 26 payments in a year.

   • Monthly: Payments are made once a month, with 12 payments in a year.

   • Quarterly: Payments are made every three months, resulting in four payments in a year.

   • Semi-annually: Payments are made twice a year, with two payments in a year.

   • Annually: Payments are made once a year, resulting in a single payment in a year.

3. The Contract Duration in Months refers to the length of time for which a loan or credit agreement is valid. It represents the agreed-upon period during which payments will be made until the loan is fully paid off or the credit agreement is fulfilled. The contract duration can vary depending on the type of loan, the lender's terms, and the borrower's preferences. For example, a common contract duration for a personal loan or a car loan could be 12 months, 24 months, 36 months, or longer.

4. Interest Rate is a percentage that represents the cost of borrowing funds from a lender. It is applied to the principal amount of a loan or credit agreement. The interest rate is one of the key factors that determine the total cost of borrowing and influences the amount of interest you will pay over the loan term.

5. Residual Value refers to the estimated value of an asset at the end of its useful life or lease term. It is commonly used in leasing or financing agreements, particularly for assets such as vehicles, equipment, or real estate.

6. Lending Amount refers to the total amount of money being borrowed or financed by the lender or financial institution to fund a purchase or transaction in favour of a borrower. Simply it represents the amount of money that is being provided by the lender to the borrower.

7. Periodic Repayment Amount refers to the amount of money that a borrower is required to pay at regular intervals to repay a loan or credit agreement. It is the fixed payment made by the borrower to the lender on a recurring basis, typically monthly, but it can also be weekly, biweekly, or quarterly depending on the terms of the loan.

8. Click on Calculate button to view How Much I Need to Pay Upfront amount.

Rental Calculation

The rental calculation screen ascertains the rental details associated with renting or leasing a product or service. It allows users to evaluate different scenarios, understand the costs involved, and make informed decisions based on their financial capabilities and requirements. These calculations can be parametrized on the basis of rental calculation, start date, payment mode, payment frequency, contract duration in months, interest rate, lending amount and residual value. Moreover user can input irregular payments details before calculating rental details. After completing calculations rental details are displayed under term from, term to, rental amount and rental type columns.

Rental Calculation

1. Rental Calculation refers to methods used to calculate rental payments. The specific method used can depend on factors such as the type of property, local market practices, and the terms agreed upon between the lender and borrower. Rental calculation methods include annuity, annuity - actual 360, annuity - actual 365, flat and equal principal.

   • Annuity is a series of regular rental payments over a specific period.

   • Annuity - Actual 360 is a series of regular rental payments over a specific period where the year is assumed to have 360 days.

   • Annuity - Actual 365 is a series of regular rental payments over a specific period where the year is assumed to have 365 days.

   • Flat is a straightforward approach where the borrower pays a fixed, constant amount of rental payment throughout the lease term.

   • Equal Principal is a way to determine rental payments where the principal amount is evenly distributed over the lease term.

2. Start Date the date from when the rental calculation is required to be calculated. By default, current date is displayed.

3. Payment Mode refers to how the payments on a loan or credit agreement are structured. Two common payment modes are "advance" and "arrears."

   • Advance Payment Mode: In advance payment mode, the borrower makes the payment at the beginning of the specified period. For example, if you have a monthly payment schedule and the payment mode is set to advance, you would make the payment at the start of each month. This means that the payment covers the upcoming period of time.

   • Arrears Payment Mode: In arrears payment mode, the borrower makes the payment at the end of the specified period. Using the same example of a monthly payment schedule, if the payment mode is set to arrears, you would make the payment at the end of each month, after the period has elapsed.

4. Payment Frequency refers to how often you make payments on a loan or credit agreement. The frequency can vary depending on the terms of the agreement and the preferences of the lender and borrower. Payment frequency options include weekly, fortnightly, monthly, quarterly, semi-annually and annually.

   • Weekly: Payments are made on a weekly basis, with 52 payments in a year.

   • Fortnightly: Payments are made every two weeks, resulting in 26 payments in a year.

   • Monthly: Payments are made once a month, with 12 payments in a year.

   • Quarterly: Payments are made every three months, resulting in four payments in a year.

   • Semi-annually: Payments are made twice a year, with two payments in a year.

   • Annually: Payments are made once a year, resulting in a single payment in a year.

5. The Contract Duration in Months refers to the length of time for which a loan or credit agreement is valid. It represents the agreed-upon period during which payments will be made until the loan is fully paid off or the credit agreement is fulfilled. The contract duration can vary depending on the type of loan, the lender's terms, and the borrower's preferences. For example, a common contract duration for a personal loan or a car loan could be 12 months, 24 months, 36 months, or longer.

6. Interest Rate is a percentage that represents the cost of borrowing funds from a lender. It is applied to the principal amount of a loan or credit agreement. The interest rate is one of the key factors that determine the total cost of borrowing and influences the amount of interest you will pay over the loan term.

7. Lending Amount refers to the total amount of money being borrowed or financed by the lender or financial institution to fund a purchase or transaction in favour of a borrower. Simply it represents the amount of money that is being provided by the lender to the borrower.

8. Residual Value refers to the estimated value of an asset at the end of its useful life or lease term. It is commonly used in leasing or financing agreements, particularly for assets such as vehicles, equipment, or real estate.

9. Irregular Payments section is used to define any irregular rental payments other than regular rental payments. Click on the required radio button under Irregular Payments section of window. If user clicks on No the regular rental payments are calculated and if user clicks on Yes then user is required to input details of irregular payments. Term From and Term To are used to input starting term number and ending term number for irregular payment. Amount refers to the amount of rental payment. Irregular payment Type can be:

   • Structured means payments of different amounts in different intervals over a specified period i.e. term from and term to defined for respective irregular rental payments.

   • Interest Only where the borrower pays only the interest portion of rental for a specified period, without reducing the principal balance.

   • Auto refers that respective rental repayment is auto manically generated by system for respective term from and term to defined for irregular rental payment.

   • Zero where the borrower pays zero amount of rental for a specified period.

10. User can add more than one records under Irregular Payments by clicking Add More button.

11. Click on the Calculate button to view rental calculation details displayed under Term From, Term To, Rental Amount and Rental Type columns.

Calculate Rate

Rate also known as APR refers to the Annual Percentage Rate is a standardized way of representing the cost of borrowing or the interest rate on a loan. In loan and lease initiation, the calculation of interest rate can vary depending on the specific terms and conditions of the loan or lease agreement. Generally, the interest rate is determined by the lender or lessor based on factors i.e. payment mode, payment frequency, lending amount, residual value and rental slabs.

Calculate Rate

1. Payment Mode refers to how the payments on a loan or credit agreement are structured. Two common payment modes are "advance" and "arrears."

   • Advance Payment Mode: In advance payment mode, the borrower makes the payment at the beginning of the specified period. For example, if you have a monthly payment schedule and the payment mode is set to advance, you would make the payment at the start of each month. This means that the payment covers the upcoming period of time.

   • Arrears Payment Mode: In arrears payment mode, the borrower makes the payment at the end of the specified period. Using the same example of a monthly payment schedule, if the payment mode is set to arrears, you would make the payment at the end of each month, after the period has elapsed.

2. Payment Frequency refers to how often you make payments on a loan or credit agreement. The frequency can vary depending on the terms of the agreement and the preferences of the lender and borrower. Payment frequency options include weekly, fortnightly, monthly, quarterly, semi-annually and annually.

   • Weekly: Payments are made on a weekly basis, with 52 payments in a year.

   • Fortnightly: Payments are made every two weeks, resulting in 26 payments in a year.

   • Monthly: Payments are made once a month, with 12 payments in a year.

   • Quarterly: Payments are made every three months, resulting in four payments in a year.

   • Semi-annually: Payments are made twice a year, with two payments in a year.

   • Annually: Payments are made once a year, resulting in a single payment in a year.

3. Lending Amount refers to the total amount of money being borrowed or financed by the lender or financial institution to fund a purchase or transaction in favour of a borrower. Simply it represents the amount of money that is being provided by the lender to the borrower.

4. Residual Value refers to the estimated value of an asset at the end of its useful life or lease term. It is commonly used in leasing or financing agreements, particularly for assets such as vehicles, equipment, or real estate.

5. Start Term, End Term and Amount are used to Add Rental Slabs before rate calculation. User can add more than one rental slabs if required.

6. Click on the Calculate button to view Interest Rate.

Step Rental

Step rental calculations typically involve determining the rental or loan payment amounts at specific intervals or steps throughout the term. The purpose of step rental is to provide a gradual increase or decrease in rental payments. These steps can involve increasing or decreasing the rental payment amounts based on predefined criteria. These step rental calculations can be parametrized on the basis of payment mode, payment frequency, contract duration in months, lending amount, residual value, interest rate, type of stepping rentals up or down, percentage of stepping rentals up or down and frequency of stepping rentals up or down.

Here's an example of step rental with annual increases:

Let's assume a commercial lease with a base rent of $1,000 per month and an agreement for a 3% annual step rental increase. The rental payments would progress as follows:

• Year 1: $1,000 per month

• Year 2: $1,030 per month ($1,000 + 3% increase)

• Year 3: $1,061 per month ($1,030 + 3% increase)

• Year 4: $1,093 per month ($1,061 + 3% increase)

and so on...

Step Rental

1. Payment Mode refers to how the payments on a loan or credit agreement are structured. Two common payment modes are "advance" and "arrears."

   • Advance Payment Mode: In advance payment mode, the borrower makes the payment at the beginning of the specified period. For example, if you have a monthly payment schedule and the payment mode is set to advance, you would make the payment at the start of each month. This means that the payment covers the upcoming period of time.

   • Arrears Payment Mode: In arrears payment mode, the borrower makes the payment at the end of the specified period. Using the same example of a monthly payment schedule, if the payment mode is set to arrears, you would make the payment at the end of each month, after the period has elapsed.

2. Payment Frequency refers to how often you make payments on a loan or credit agreement. The frequency can vary depending on the terms of the agreement and the preferences of the lender and borrower. Payment frequency options include weekly, fortnightly, monthly, quarterly, semi-annually and annually.

   • Weekly: Payments are made on a weekly basis, with 52 payments in a year.

   • Fortnightly: Payments are made every two weeks, resulting in 26 payments in a year.

   • Monthly: Payments are made once a month, with 12 payments in a year.

   • Quarterly: Payments are made every three months, resulting in four payments in a year.

   • Semi-annually: Payments are made twice a year, with two payments in a year.

   • Annually: Payments are made once a year, resulting in a single payment in a year.

3. The Contract Duration in Months refers to the length of time for which a loan or credit agreement is valid. It represents the agreed-upon period during which repayments will be made until the loan is fully paid off or the credit agreement is fulfilled. The contract duration can vary depending on the type of loan, the lender's terms, and the borrower's preferences. For example, a common contract duration for a personal loan or a car loan could be 12 months, 24 months, 36 months, or longer.

4. Lending Amount refers to the total amount of money being borrowed or financed by the lender or financial institution to fund a purchase or transaction in favour of a borrower. Simply it represents the amount of money that is being provided by the lender to the borrower.

5. Residual Value refers to the estimated value of an asset at the end of its useful life or lease term. It is commonly used in leasing or financing agreements, particularly for assets such as vehicles, equipment, or real estate.

6. Interest Rate is a percentage that represents the cost of borrowing funds from a lender. It is applied to the principal amount of a loan or credit agreement. The interest rate is one of the key factors that determine the total cost of borrowing and influences the amount of interest you will pay over the loan term.

7. Step Up/Down represents gradual increase or decrease in rental payments.

   • Step Up represents gradual increase in rental payments.

   • Step Down represents gradual decrease in rental payments.

8. Step Up/Down % refers to the rate or percentage by which the rental payment increases/decreases at each step or interval in a step rental lease agreement.

9. Step Up/Down Frequency refers to how often the rental payments increase or decrease in a step rental lease agreement. It determines the intervals at which the rental amounts are adjusted during the lease term.

10. Click Calculate to view step rentals. After completing calculations rental details are displayed under term from, term to, terms, change rate and monthly rental whereas repayment plan displays details under rental number, opening principal, rental amount, principal amount, interest, periodic interest and closing principal columns.

11. Click Export to export step rental details and/or repayment plan respectively.