# How to create new loan - Interest Recalculation

Beginning at the main screen, select **Admin**, then **Products** from the drop-down menu. This will launch the **Products** menu.

Select **Loan Products.** &#x20;

#### &#x20;Create Loan Product&#x20;

Provide all the required input for the Loan Product Fields, also refer link:- Loan Products.

> **In Loan product, Go to : Interest Recalculation.**&#x20;
>
> **On checking the check for Recalculate Interest will enable interest recalculation and opens up configuration fields.** &#x20;

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |
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| <p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/s3.png?version=1&#x26;modificationDate=1454573856217&#x26;cacheVersion=1&#x26;api=v2&#x26;width=360" alt=""></p><p><strong>Pre-closure interest calculation rule:-</strong></p><p>This defines till when the interest should calculate on the event of pre closure.</p><p><strong>Calculate till pre closure date -</strong></p><p>Selecting this will calculate interest till as on closing date.</p><p>For example - suppose Loan closing date is on 20th February, so interest will be calculated till 20th February.</p><p><strong>Calculate till rest frequency date</strong> -</p><p>Selecting this will calculate interest till the rest period.</p><p>For example - suppose Loan closing date is on 20th February, so interest will be calculated till 30th February.</p> |   |
| <p></p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/28.png?version=1&#x26;modificationDate=1454574023605&#x26;cacheVersion=1&#x26;api=v2&#x26;width=300" alt=""></p><p><strong>Advance payments adjustment type:-</strong></p><p>This defines on the event of advance payments how the repayments should get adjusted.</p><p><em><strong>Reduce EMI amount -</strong></em></p><p>Will reduce EMI amount on the advance payments.</p><p><em><strong>Reduce number of installments -</strong></em></p><p>Will reduce number of installments on the advance payments.</p><p><em><strong>Reschedule next repayments -</strong></em></p><p>Will <em>reschedule to next repayments</em>.</p>                                                                                                                                         |   |
| <p></p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/29.png?version=1&#x26;modificationDate=1454574092735&#x26;cacheVersion=1&#x26;api=v2&#x26;width=332" alt=""></p><p><strong>Interest recalculation compounding on:-</strong></p><p><em><strong>None -</strong></em> Compounding will not happen, only interest recalculation will happen.</p><p><em><strong>Fee -</strong></em> Compounding will happen on fee.</p><p><em><strong>Interest -</strong></em> Compounding will happen on interest.</p><p><em><strong>Fee and Interest -</strong></em> Compounding will happen on fee and interest.</p>                                                                                                                                                                                                                         |   |
| <p></p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/30.png?version=1&#x26;modificationDate=1454574166047&#x26;cacheVersion=1&#x26;api=v2&#x26;width=361" alt=""></p><p><strong>Frequency for recalculate Outstanding principal:-</strong></p><p>Once the client makes advance repayments, his outstanding principal may be recalculated on a weekly, fortnightly, monthly or quarterly basis, thereby reducing the weekly, fortnightly, monthly outstanding balance.</p>                                                                                                                                                                                                                                                                                                                                                       |   |
| <p></p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/31.png?version=1&#x26;modificationDate=1454576305781&#x26;cacheVersion=1&#x26;api=v2&#x26;width=348" alt=""></p><p><strong>Frequency interval for recalculation:-</strong> This field accompanies the 'Frequency for recalculate outstanding principle'. Example:- Selecting the interval as 1 and the frequency as monthly would result in the outstanding balance (reduction) being calculated for every month.</p>                                                                                                                                                                                                                                                                                                                                                      |   |
| <p></p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/32.png?version=1&#x26;modificationDate=1454576321258&#x26;cacheVersion=1&#x26;api=v2&#x26;width=300" alt=""></p><p><strong>Frequency Date for recalculation:-</strong> The date on which reduced outstanding balance will be calculated.</p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |
| <p></p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/33.png?version=2&#x26;modificationDate=1454576354097&#x26;cacheVersion=1&#x26;api=v2&#x26;width=213" alt=""></p><p><strong>Is Arrears recognition based on original schedule:-</strong></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| <p>Makes sure "Calculate interest for exact days in partial period" is Checked box</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/35.png?version=1&#x26;modificationDate=1455017444656&#x26;cacheVersion=1&#x26;api=v2&#x26;width=312" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
| <p>Loan production definition</p><ul><li>Remains the same for all the scenarios below.</li></ul><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/37.png?version=1&#x26;modificationDate=1455019163965&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/38.png?version=1&#x26;modificationDate=1455019179677&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                      |   |
| <p>Original repayment schedule remains same for all the examples.</p><p> I.e Loan disbursement on 1st Nov, 2015. Repaid every 1 month for 10 months.</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/41.png?version=1&#x26;modificationDate=1455020668733&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| <p>Scenario 1 - With the mentioned interest recalculation definition below</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/39.png?version=1&#x26;modificationDate=1455019394447&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |
| <p>Scenario 1 - Showing example of late repayment.</p><p>Client makes on time repayment for 1st installment i.e on 1st December. So for the unpaid on time installments i.e for January, February and March interest has been recalculated as shown in the  screenshot example below.</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/42.png?version=1&#x26;modificationDate=1455020977258&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                         |   |
| <p>Scenario 2 - On advance payment - Should reduce EMI amount</p><p>With the mentioned interest recalculation definition below</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/45.png?version=2&#x26;modificationDate=1455084611958&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| <p>Scenario 2 - Showing example of Advance repayment - Should reduce EMI amount</p><p>Client makes on time repayment for 1st and 2nd installment i.e for 1st Dec and 1st January. And makes an advance payment as on 1st February (3rd installment). So for the remaining installments EMI amount gets reduced.</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/43.png?version=1&#x26;modificationDate=1455022238088&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                               |   |
| <p>Scenario 3 - On advance payment - Reduce number of installments,</p><p>With the mentioned interest recalculation definition below,</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/47.png?version=1&#x26;modificationDate=1455085572553&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |
| <p>Scenario 3 - Showing example of Advance repayment - Reduce number of installments,</p><p>Client makes on time repayment for 1st and 2nd installment i.e for 1st December and 1st January. And makes an advance payment as on 1st February (3rd installment). So number of installments gets reduced to 9 instead of 10.</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/46.png?version=1&#x26;modificationDate=1455085447091&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                    |   |
| <p>Scenario 4 - On advance payment - Reschedule next repayments</p><p>With the mentioned interest recalculation definition below,</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/49.png?version=1&#x26;modificationDate=1455093909349&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
| <p> Scenario 4 - Showing example of Advance repayment - Reschedule next repayments</p><p>Client makes on time repayment for 1st and 2nd installment i.e for 1st December and 1st January. And makes an advance payment as on 1st February (3rd installment). So number of installments gets rescheduled</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/48.png?version=1&#x26;modificationDate=1455093806293&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                       |   |
| <p>Scenario 5: Pre closing the loan using pre-closure rule as:-</p><p>Calculate till pre closure date</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/54.png?version=1&#x26;modificationDate=1455097316868&#x26;cacheVersion=1&#x26;api=v2&#x26;width=362" alt=""></p><p>Loan product definition remains same as mentioned above, but in this example:</p><p>Disbursement is done on - 1st February 2016</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/50.png?version=1&#x26;modificationDate=1455095944209&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                       |   |
| <p>Scenario 6: Pre closing the loan using pre-closure rule as:-</p><p>Calculate till pre closure date</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/55.png?version=2&#x26;modificationDate=1455097607439&#x26;cacheVersion=1&#x26;api=v2&#x26;width=372" alt=""></p><p>Loan product definition remains same as mentioned above, but in this example:</p><p>Disbursement is done on - 1st February 2016</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/50.png?version=1&#x26;modificationDate=1455095944209&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                       |   |
| <p>Click on Prepay loan button</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/51.png?version=1&#x26;modificationDate=1455096268628&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| <p>Click on Prepay loan button</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/51.png?version=1&#x26;modificationDate=1455096268628&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| <p>In this example prepaying loan on 10th February 2016.</p><p>Interest calculation is for - 10 days only, i.e till the pre closure date.</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/52.png?version=1&#x26;modificationDate=1455096488855&#x26;cacheVersion=1&#x26;api=v2&#x26;width=245" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
| <p></p><p>In this example prepaying loan on 10th February 2016.</p><p>Interest calculation is for the whole month, i.e till rest frequency period.</p><p>Note:- Frequency for recalculate Outstanding Principal</p><ul><li>Is given as "Same as repayment period". So the calculation is considered as the repayment period - for month.</li><li>If it was "Daily" Then it would have been calculated till that date i.e till 10th February in this example.</li></ul><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/53.png?version=1&#x26;modificationDate=1455096965466&#x26;cacheVersion=1&#x26;api=v2&#x26;width=251" alt=""></p>                                                                                                                                                                                            |   |
| <p>Scenario 7: Frequency for recalculate outstanding principal:-</p><p>Same as repayment period</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/58.png?version=1&#x26;modificationDate=1455103416397&#x26;cacheVersion=1&#x26;api=v2&#x26;width=250" alt=""></p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/57.png?version=1&#x26;modificationDate=1455103265876&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                                                                                                                   |   |
| <p>Scenario 8: Frequency for recalculate outstanding principal:Daily</p><p>Frequency interval for recalculation: 1</p><p>Frequency date for recalculation: Before disbursement date.</p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/59.png?version=1&#x26;modificationDate=1455103403713&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p><p><img src="https://mifosforge.jira.com/wiki/download/thumbnails/112295990/56.png?version=1&#x26;modificationDate=1455103174837&#x26;cacheVersion=1&#x26;api=v2&#x26;width=450" alt=""></p>                                                                                                                                                                                                                                                                              |   |

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