Payment holiday
A payment holiday can be created against a
finance agreement, where the borrower will not have instalments raised and not
be required to make payments during the holiday period. Interest will continue
to be capitalised as per the original instalment dates, but no instalments will
be raised thus no arrears actions will take place during the holiday period. So,
in this case the days in arrears will not increase for the payment missed during . If no additional payments
are made then the finance agreement will come out of a payment holiday with the
same days in arrears as when the payment holiday started. The arrears amount
will only differ by the interest capitalised during the payment holiday period.
Payment holiday details can only be added and cancelled;
they cannot be modified. A payment holiday can only be cancelled if it is active and the current trading date is prior to the first
instalment that will become zero as a result of the payment holiday.
Payment holidays are only allowed on finance
agreements that do not have active promise to pay payment arrangements in place.
This is because payment arrangements already have future payments adjusted to
accommodate the payment arrangement as per the borrower’s instructions and as
such it is not possible to override and change. Payment arrangements can also
be broken where after the original payment plan as per the original instalments
becomes active again and as such payment holidays cannot be created on top of a
payment arrangement.
A promise to pay payment arrangement can be
built on top of a payment holiday but not visa versa.
A payment holiday can be built on top of change payment plan.
A change payment plan cannot be built on top of
a payment holiday.
The instalments on the payment plan will consist
of:
- All
instalments during the payment holiday period will be made zero. Note that just as with a change
payment plan, the interest will continue to be raised on the original
instalment date.
- All
instalments after the expiry date will be modified as follows depending on the value chosen by the user for “Adjust instalments after expiry”
- If
set to “Increase all instalments”, all instalments that follow the expiry of
the payment holiday will be increased evenly so that the original number of
instalments as per the term on the finance agreement, remains the same.
- If
set to “Increase last instalment only”, all instalments that follow the expiry
of the payment holiday will remain as per the original instalment amounts
except the final instalment which will be increased to accommodate the missed
instalments during the payment holiday.
- If
set to “Add additional instalments” then the instalments missed during the
payment holiday will be moved to the end, so they occur after the
final instalment. The exact number of instalments that have been made zero will
be moved to the end of the finance agreement. This will increase the
instalments to beyond the term of the finance agreement. If this option is chosen
the instalment dates will move to beyond the term of the finance agreement but
the term itself and the maturity dates of the finance agreement will not
change.
- If set to “Add additional instalments of same value” then the instalments missed during the payment holiday will be moved to the end, so they occur after the final instalment but they will be of the same value as the instalments missed. This will increase the instalments to beyond term of the finance agreement and also include extra instalment(s) to cater for the interest as a result of the missed instalments being moved. Any interest will be added as additional instalment/s but never to a value more than the original instalment amount on the financial profile that was setup on drawdown
1. To create a payment holiday on a finance agreement, navigate to Home pages -> Borrowing -> Finance Agreements
2 Use the filter options to filter for the finance agreement that you need to apply the changes.
3. Once you have selected the finance agreement from the list navigate to the Actions Menu > Payment Arrangement > Payment Holiday:
- Change arrears status : only visible if the finance agreement is in arrears. Not mandatory but allows the user to change the arrears status at the same time as creating the payment holiday
- Change arrears pool: only visible if the finance agreement is in arrears. not mandatory but allows the user to change the arrears pool at the same time as creating the payment holiday
- Freeze days in arrears : only visible if the finance agreement is in arrears. If selected the finance agreement will have the same days in arrears value, both during and after the payment holiday as when the payment holiday started
- Report Status: not mandatory but allows the user to change the reports status at the same time as creating the payment holiday
4. Once the details have been supplied click on save to complete and create the payment holiday. Once saved the payment holiday will be created and immediately active.
Calculating the details on a payment holiday results in a large amount of work that needs to be done as a finance agreement can have multiple investments that are fractionalised and each one of them needs to be altered and have earnings schedules and amoritisations modified as per the new instalments. In order to prevent you from having to wait while all the calculations are done, it will be completed in the background so you can continue to do other work. While the calculations are being scheduled and completed in the background, you will be presented with a "notification" that details the calculations are in progress. See here for details on notifications
Once complete the notification will no longer appear on the screen.
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