LoanPro gives you the option to configure automatic late fees for your company. These are fees that are automatically assessed on your accounts once the grace periods on the accounts have passed.
There are several ways to configure late fees. You can:
- set late fee defaults according to loan category and type
- set late fees for individual accounts
- turn late fees on or off according to status
This article will also cover when a late fee will be charged.
How To Set Late Fee Defaults
To set the defaults for late fees, navigate to Settings > Defaults > New Loan > Loan Type Specific inside your company account.
You can choose to set separate defaults based on the the loan category (automobile, consumer, real estate, other) and loan type (installment, credit limit, flooring, lease). Choose the loan category and loan type that you want, and then click Edit.
Navigate to the Late Fee Configuration area.
Here you can choose the late fee options that your accounts will start out with. The available options are:
- Late Fee Type – This selection lets you choose one of three ways for late fees to be assessed.
- Standard – A late fee will be assessed if the account is past due, regardless of the past-due amount.
- Standard Fee – A late fee will be assessed if the loan is past due in an amount greater than the late fee amount.
- Current – If a payment has been made in the current period, no late fee will be assessed; otherwise, a late fee will be assessed if the account is past due.
- Grace Period (Days) – This is the number of days after a payment comes due before a late fee can be assessed. As an example, suppose you choose 5, and a payment comes due on the 1st of the month. If the customer pays on or before the 6th of the month, no late fee will be assessed.
- Late Fee – Here you can specify the amount of the late fee. Options include:
- Flat $30.00 fee
- Custom dollar amount
- Custom percentage of the percentage base
- Greater of a specified dollar amount or percentage
- Lesser of a specified dollar amount or percentage
- Late Fee Percentage Base – This area lets you choose what number to base the late fee percentage on. The percentage will always be based on the regular payment amount at a minimum. You can also choose to add the escrow amount (current payment period escrow adjustment amount) to the payment to create a new percentage base. You may include any number of the escrow buckets on your account.
- Buckets Added To Late Fee Percentage Base – To add an escrow bucket to the percentage base, click in the field. This should bring up a list of your escrow buckets. You can type in the field to filter escrow buckets by keyword. When you select an escrow bucket, it will stay in the field until you click the icon. You can re-click the field to search for and add as many buckets as you want.
Once you have entered the default information, click Save to save the defaults.
How To Set the Options on an Account
The default late fee settings may not suffice in every situation. If you need to customize the settings for a specific account, you can do so in Account Setup > Setup Terms > Late Fee Configuration.
The options here are the same as they are when setting the defaults.
If the loan has already been activated, it will be easier to make adjustments to the late fee settings in Account Setup > Setup Tools > Late Fees. Note that this tool is not available if the loan has not been activated.
The options here are the same as the options when setting the defaults. Once you have made the necessary changes, click Save Changes.
Late Fees By Status
It may be that you only want accounts in certain statuses to have late fees assessed on them. LoanPro lets you select whether late fees should be on or off for certain statuses. To do this, navigate to Settings > Loan > Charges > Late Fee By Status.
At the top right of this area, you can choose the late fee application from the “Default Late Fee Application” drop-down. The options are:
- Standard – Late fees will come due as soon as they are posted to the account. A standard fee will add to the account’s “Amount Past Due” balance. A major benefit of choosing this option, is that the customer will be aware that there was a fee added to the account and that they need to pay the fee to come current.
- Payoff Only – Late fees will only be due with the loan payoff. A payoff only fee will not add to the account’s “Amount Past Due” balance, but will instead only increase the loan’s payoff amount. One thing to note when making a payoff fee is that LoanPro does not natively provide a payment waterfall application that will apply payments towards payoff only fees. To apply payments to payoff only fees, you can create your own custom waterfall application. Or you can apply a custom payment application on an individual payment basis while logging a payment.
You are also given a toggle switch for each sub-status to let you choose if late fees should be assessed for accounts in that status. There is a column labeled “Active” on this page that shows whether a sub-status is active for your company. To customize the list of account statuses and sub-statuses for your company, go to Settings > Loan > Labeling > Loan Status.
When Late Fees will be Charged
Late fees will be assessed during the daily maintenance process. The late fee will be charged on the loan when the days past due (from the Days Past Due table for that particular due date) equals the grace period number. So if the loan is only 1 payment past due by 5 days (DPD = 5), and the grace period is also 5, then the late fee will be charged on that day.