Title Loan - Increase the Principal on an Installment Loan
You cannot directly increase principal on an installment loan, because the client has set payments with set principal reductions. There are two methods to increase principal on a title loan:
(1) Keep the current loan and do a new installment loan for the increase in principal. This would give the client two different payments, but this may actually be good. If the client likes the idea of coming in twice and making two smaller payments, everything is fine. If the client would rather come in and make one large payment, the client should come in on the earlier of the two payment dates. Of course, if the new loan can be dated on the same day of the month as the original loan, the two payment dates would fall on the same day each month.
(2) Pay off the original installment loan, writing two manual checks: one for the payoff amount of the old loan made out to the store (or as a joint check, or made out to the client and endorsed over to the store), and one for the principal increase to be paid to the client. Do a new installment loan for the unpaid balance of the first loan plus the principal increase, then give the client the check for the difference between the total principal of the new loan and the unpaid balance of the first loan. For instance, a client has a loan with $500 principal and accrued interest through the 30th of the month of $100 (please keep in mind the scheduled payment amount will be higher than $100 because each installment payment includes principal). If the client wants to up the loan principal on the 15th of the month, the steps would be: (a) First, decide if the current interest and fees due will be paid by the client, in which case only the principal of the loan will be carried forward. In some states, it may be illegal to convert unpaid interest to principal, and it is your responsibility to know this and handle the transaction correctly. It is safest to ask the client to pay the current interest due before the loan is paid off. (a) Call up the current loan on the Current Loans tab, click on Additional Information, make sure the payoff date is correct, confirm the payoff amount is correct, and carefully confirm that the client does indeed want to pay off the current loan and take out a new loan with the principal increase. The difference between the current principal on the loan and the payoff amount should be the current interest and fees due, but please check to be sure. If the client is paying the interest and fees due, take the payment from the client, then go back to the Payoff section of Additional Information and use the Payoff Account button to pay off the loan. Then create a new installment loan with the principal amount being the unpaid balance of the first loan plus the principal increase. If you company is set up to charge a title lien fee or other up front fee and you do not want a title lien fee on the new loan, be sure to set the title lien fee and/or other fees to zero by using the Fees tab of Additional Information before saving and printing the new contract. If asked to print a check, do not print a check unless you can cash the check and use cash to pay the client and to pay the old loan off (in this case, the old loan would be paid off with Cash rather than Check as the transaction type). If you are using the "two check" payment method, write two manual checks and if you want the checks to show up in the Check Register, be sure to enter them using Tools, Check Register. If you don't do these types of loan increases very often, it would be a good idea to immediately check the Cash Drawer and the daily reports you use for end of day and balancing purposes, to make sure that everything was done correctly.