How are days in arrears calculated

How are days in arrears calculated

Days in arrears are the number of days that have passed since the latest instalment that had to be paid on a finance agreement that has not been fully paid .

If a finance agreement had an instalment to be paid on the 1 January 2010 and it was not paid and today is the 5 January 2010 then the finance agreement would be 4 days in arrears. As 4 days have passed since the payment was supposed to be paid. Payments received are allocated first to all fees outstanding and then to arrears. This is important to remember when determining the days in arrears.

Example, If a finance agreement had an instalment to be paid on the 1 January 2010 of $100 but on 1st January there is an outstanding fee balance of $150, if the payment of $100 is made it will all be allocated to the fee balance and as such the instlament to be paid on 1st January will be regarded as unpaid and the days in arrears will increase.

Here is an example of the days in arrears for a few scenarios

Date

Transaction Type

Amount

Days in arrears

 

1/1/2020

Instalment due

100

 

 

1/1/2020

payment received

100

0

 

1/2/2020

Instalment due

100

 

 

1/2/2020

direct debit receipt

100

0

 

3/2/2020

dishonour

-100

2

2 days in arrears as payment was supposed to made on the 1 Feb which has dishnoured and it is now 3 Feb, 2 days later

1/3/2020

Instalment due

100

29

29 days in arrears as payment was supposed to made on the 1 Feb and it is now 1 March, 29 days later

1/3/2020

direct debit receipt

100

0

the payment for 100 is allocated to the missed payment on 1 Feb. So now the payment on the 1 March is outstanding so therefore 0 days

2/3/2020

 

 

1

instalment from 1 March is outstanding so 1 days in arrears

1/4/2020

Instalment due

100

31

31 days in arrears as payment was supposed to made on the 1 March and it is not 1 april, 31 days later

1/4/2020

direct debit receipt

50

31

50 is allocated to the missed instalment that was not paid on  1 March. Because the 1 March is not fully paid the days in arrears is still 31 days

10/4 2020

payment received

80

9

50 of the 80 is allocated to the missed instalment on 1 march which means that instalment is now fully paid. The balance of 30 goes to the missed instalment on 1 April. Which leaves 70 outstanding for 1 April. So days therefore 9 days in arrears i.e. from 1 April which is not fully paid

12/4/2020

fee

30

11

 

14/4/2020

fee

20

13

 

16/4/2020

payment received

50

15

The payment of 50 is all allocated to fees as per rule explained, so therefore the instalment on the 1 April is still outstanding

 



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