Hi Saif, My thought is that the "actual days" approach seems like a more fair and equitable way to distribute the interest across the actual N days that are there in any month.
For example: In Feb, the borrower is paying on the 27th day. Then 27/28 seems more accurate than 27/30. 27 by 30 seems to imply that the lender is collecting 27 days interest for a 30 day period. Similarly, in May, if the borrower is paying on the 30th day, then it seems more fair to calculate for 30/31 rather than 30/30. 30/30 seems to imply that the lender is charging interest for the full month, whereas in reality the borrower need to pay interest only for 30 days out of the 31 days available. This approach that Fineract follows seems reasonable to me. Not sure if there could be a concern from a regulatory perspective or accounting standards perspective. Thanks Binny On Fri, Oct 23, 2020 at 12:15 PM Saifudeen Khan <sai...@zucisystems.com> wrote: > Got it, it has to be 20/28 as the days between Feb – Mar is 28 days. > > > > *The bigger question is, why is actual days taken into account? Should it > not be 30 days since I selected 30/360 model?* > > > > *From:* Saifudeen Khan <sai...@zucisystems.com> > *Sent:* 23 October 2020 12:06 > *To:* dev@fineract.apache.org > *Subject:* RE: Loan Repayment Calculation upon Loan Reschedule > > > > CAUTION: This email originated from outside of the organization. Do not > click links or open attachments unless you recognize the sender and know > the content is safe. > > > > Thanks so much Binny, tried the same formula for the another period, not > matching. > > > > 22-Dec-20 > > 14-Mar-21 > > 82 > > 360 > > 10% > > 84,000.28 > > 1913.339666 > > 1,900.01 > > I used your logic (2+(24/30)), (2+24/31), all gives different results, > none matching. Am I taking the right number? > > > > On a broader note, is it right to take 31 day for calculation while I > specifically selected the 30/360 method for calculation? Is it a flaw? > > > > Regards > > s@if > > > > > > *From:* Binny Gopinath Sreevas <binny.gopin...@gmail.com> > *Sent:* 23 October 2020 09:07 > *To:* Dev <dev@fineract.apache.org> > *Subject:* Re: Loan Repayment Calculation upon Loan Reschedule > > > > CAUTION: This email originated from outside of the organization. Do not > click links or open attachments unless you recognize the sender and know > the content is safe. > > > > Hi Saif, > > > > I have not fully validated your excel sheet. However, here is my > understanding: > > > > Fineract treats a full month as 20th to the next 20th date. But when a > partial month is involved, Fineact does an exact-days-based calculation. > > > > In your example 20th Dec 2020 to 20th Jan 2020 is treated as one full month > > The period from 20th Jan to 14th Feb has 25 days and the full month (20th > Jan to 20th Feb) would have had 31 days - so it is treated as 25/31th > portion of a month. > > > > 84,000.28 * 10% / 12 * ( 1 + 25 / 31 ) = 1,264.52 > > > > Hope this will be of some help. > > > Regards > > Binny > > > > On Fri, Oct 23, 2020 at 12:44 AM Saifudeen Khan <sai...@zucisystems.com> > wrote: > > Team > > > > I am new to Fineract and presently trying to learn the platform. I created > a loan product with the following terms > > > > Principal - 100000; Interest - 10%/year; 12 months duration; declining > balance; 30/360 method > > > > How does the interest calculation part work here? I tried doing a sanity > and found a difference of 4/- for a mount of 100000 issued over for a > period of 12 months with 10% interest/year > > > > Step 1: Disbursed Loan on 20-Oct > Step 2: Repayment of 2 EMI (Nov, Dec) > Step 3: Reschedule Loan from 20 Jan 2021 to 14 Feb 2021 > Step 4: View Repayment schedule > Step 5: See the interest calculated for 14 Feb 2021 as 1,264.520 > > While validating manually (Interest = P-Pp*10%*54/360), as the duration > comes as 54 days and upon calculation it comes as 1260/- only, whereas > fineract gives 1264.50/- > > I am not sure from where the difference 4 has come during the calculation. > > Regards > > s@if > > > > Disclaimer: "The contents of this e-mail and any attachments enclosed > therein are intended solely for the addressee(s) and may contain > confidential and/or privileged information. It may also be the sole > intellectual and proprietary resource of Zuci Systems and therefore may be > legally protected from disclosure. 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