Q: What are my options from switching from pre-computed amortized loans to daily interest?
A: With the pre-computed or actuarial method, the system sticks to the interest in the amortization table until the loan is paid off in full, then writes off any unearned interest as of the payoff date. In effect, payments are matched up to scheduled payments and if a client pays early or late, the pre-computed interest stays in effect until the loan is paid off in full, in which case the user MUST use the Payoff feature of the Additional Information button to calculate the payoff amount. If you want to convert old pre-computed loans to the daily interest method, there are two options:
(1) Any time you want to convert a client to daily interest, wait until he or she can pay all current fees and interest due, then use the Payoff feature, pay off the old loan using the daily interest option, then do a new contract with the remaining principal using a non-actuarial payment method. For instance, for a monthly loan, use the payment method DEFAULT-M (Monthly Payment – Company Setup Accrual Method), and be sure to enter the remaining number of payments in the Terms field. If you normally charge any upfront fees on new loans, you may want to waive them on the new contract, using the Additional Information button, then setting the fees to zero on the Interest/Fees tab, before clicking the Save+Print button to print the new contract. Your company setup must be for the daily interest accrual method before you do the new contract.
(2) The other option would be to let the loans continue on the pre-computed interest method, but always use the daily interest payoff calculation