In most states, it is not required that a new contract be printed to renew a title loan for an additional 30-day period. However, in some states a new contract is required, and some title loan companies may elect to print a new contract voluntarily. If your company makes the decision to "settle up" with a customer and print a new contract for the next 30-day period, there is an important consideration: in many states, fees and interest cannot be converted into principal, so all fees, interest and late days interest must be paid before the loan can be renewed. The process of "settling up" for the current period and renewing a loan is what we call the "Alabama method" because this is what many (though not all) our Alabama customers do. Before we discuss the specifics of this method, it's important to understand that to use this method, the Recurring checkbox for Interest on the Title Loans tab of Company Setup must NOT be checked. With the Alabama method, the computer does not decide when to add recurring interest, renew a loan, change the due date, or make a past due client current. The operator controls all these functions. The following method will not work if the Recurring checkbox for Interest on the Title Loans setup tab is checked!
Before renewing a title loan, you must always first "settle up" on all current fees, interest and any late interest. To do this, when the client comes in to make a payment there are three options:
(1) If the client wants to pay off the account in full, pull up the loan and click on additional information. Make sure the payoff date is correct (if the client is calling in to determine the correct payoff amount, you will need to adjust the date to the expected payment date, and be sure to inform the client that the payoff amount changes on a daily basis). It would be a very good idea to review his account before quoting the payoff amount. Please keep in mind that if you are using the Alabama method, it is up to you to renew loans, not the computer. So it would be a good idea to check the loan, make sure that it has been renewed properly, that all payments have been applied correctly, and that the payoff amount shown by the computer makes sense. The payoff amount should be the total of the loan principal, the current fees and interest, plus any additional late days interest. Once the account has been reviewed and verified, tell the client the payoff amount for the date in question and make sure he has the money to pay off the loan in full. If he doesn't, do NOT click the Payoff Account button (the button labeled Payoff Act or Payoff Acct). One the client has given you the correct amount of money and it has been counted to make sure the exact payoff amount has been received, click the Payoff Account button, allow the program to print the receipt, and verify that both the receipt and the loan screen show that the loan is paid in full. If either the receipt or the loan screen do not reflect that the loan is paid in full and that the loan balance is now zero, press the F9 key to refresh the loan screen. If the loan screen and receipt do not agree, call Alpha Omega for assistance.
(2) If the client can make a payment, but can't pay enough to satisfy the current fees and interest plus any late interest, do not pay off or renew the loan. Instead, take the money the client can pay, make sure that amount is entered in the amount field of the transaction submission line, and press the Submit button. This is considered a partial payment, and the loan is not paid off or renewed. Explain to the client that an additional payment is required before the loan can be renewed.
(3) If the client does not wish to pay the loan of in full, but can pay enough to satisfy all current fees and interest, plus any late days interest, use the Renew button. If the client is not paying on the due date, the program will explain this and ask if you want to apply an interest adjustment. If the client is paying early and you do not want to reduce the interest, answer No. If the client is paying late and you want to increase the interest, answer Yes. Please understand that it is up to your company to decide when to reduce or increase the interest. The program simply does what you tell it to do. Once you answer this question, the computer will bring up a renewal dialog that shows the minimum payment due to renew the loan, and of course the client can pay more if he wishes, with the additional amount reducing the principal on the new loan. If you have any questions about this procedure, please contact Alpha Omega before renewing a loan.
Here's an interesting renewal idea that rewards customers who pay early and is a token of good faith (and good free advertising for your company): if you company is accruing 30 days of interest at a time (the "loan length" method) and don't want to make an interest adjustments for early payments, but would like to make sure that clients who pay early don't pay double interest on the days prepaid, here's an idea from one of our clients. When you take the payment that satisfies the current interest ahead of time, don't renew the loan, but submit the payment using the transaction Submit button. Wait until the payment due date to renew the loan, then renew the loan with a zero client payment. Be sure the loan date is correct, or you'll either cost the client money, or you'll cost yourself money. As long as the current interest has been paid and the minimum payment has gone to zero, you can renew a loan with a zero payment. Be sure to have the client sign the loan the next time he or she comes in. You can even make a courtesy call to let the client know what you're doing, and when you explain how this will save them from paying extra interest, they'll be appreciative. This can also set you apart from local competitors who don't "go the extra mile" to reward customers who pay early.