Loan Interest

Loan Interest settings determine how interest is calculated, applied, recognized, suspended, or collected.

Workspace Reference

User Goal	Where Users Work	Typical Action
Configure product interest behavior	Loans -> Setup -> Products	Set interest type, calculation method, application method, rate behavior, accounting method, and related GL references.
Review interest on a live account	Loans -> Operations -> Accounts	Open the loan account detail and review balances, schedule rows, transactions, accrued interest, and suspense sections.
Apply accrued interest manually	Loans -> Operations -> Accounts	Use the account detail action when accrued interest must be applied before payoff or prepayment.
Add a governed interest adjustment	Loans -> Operations -> Accounts	Use the account's Adjustments tab when an approved correction must increase interest on one schedule installment.
Move interest to suspense	Loans -> Operations -> Interest Suspense	Use Move to Suspense for policy-driven suspension of interest recognition.
Release suspended interest	Loans -> Operations -> Interest Suspense	Use the row-level Release action for suspended or partially released records.
Analyze income quality	Loans -> Operations -> Portfolio Analytics or Accounting -> Operations -> Financial Reports	Compare loan balances, arrears, receivables, suspense, and income reports.

Interest Calculation

Interest calculation defines how the system determines the interest amount. This may depend on balance, rate, days, schedule, product method, or other configured rules.

Important product fields include:

Field	Meaning
Interest type	Whether the product charges normal interest, is interest-free, or uses another configured interest behavior.
Interest calculation method	The formula basis used to calculate interest, such as balance, schedule, or product-defined method.
Interest application method	When calculated interest becomes part of the account balance or due schedule.
Interest accrued accounting method	How earned interest is recognized for accounting purposes.
Interest receivable account	The asset account used when interest is earned but not yet collected.
Interest income account	The income account used when interest is recognized.

Interest Application

Interest application determines when calculated interest is added to the loan account or becomes due. This affects borrower balances and collection expectations.

Accounting Recognition

Accounting recognition determines when interest income appears in financial reports.

For accrual accounting, income is recognized when earned, even before cash is received.

For cash-basis accounting, income is normally recognized when repayment cash is received.

Finance users should use receivable and aging reports together with income reports to understand the difference between earned income and collected cash.

Manual Interest Adjustments

A manual interest adjustment is a governed servicing correction, not an interest-rate change or schedule re-amortization. It is available only when Manual Interest Adjustments was enabled in the loan account's pinned product snapshot.

The approved amount is added to the interest and total expected on one selected installment from the current approved schedule. The installment due date, principal, installment count, and future amortization remain unchanged. A previously paid installment can therefore reopen, and the system refreshes arrears using that installment's existing due date.

The completed event is recorded as one Adjustment loan transaction. Accrual-accounting products must first post through the approved interest-accrual GL rule; cash-basis products recognize the amount through the existing collection policy. Approval uses the standard Loan Component Adjustment / Create approval configuration for the loan's business unit; without a matching approved configuration, the adjustment is auto-approved. See Manual Component Adjustments for the complete approval, fee, penalty, tax, and product-version rules.

Interest In Suspense

Interest in suspense is used when income should not be recognized as normal revenue immediately, often because the account is non-performing or subject to policy restrictions.

Users should review suspense movements carefully because they affect how loan income is presented.

Operational Implications

Scenario	What Users Should Know
The account is current	Interest normally follows the product schedule and accounting method.
The account is non-performing	Policy may require interest to move into suspense instead of normal income recognition.
A payoff is being processed	Accrued interest may need to be applied before the payoff amount is final.
A repayment is received	The repayment allocation settings determine whether money clears principal, interest, fees, or penalties first.
Suspended interest is released	Releasing suspense changes income presentation and must match policy approval.