In some loan structures, the homeowner is not required to make any payments (neither interest nor principal) for the first term of their loan, however interest is accruing which must be paid later. Here is how to model this type of loan:
- Go to your account Database. Click on Financing Products, then Add Financing Product. Give your template a descriptive name. Click Create.
- Click Add Loan. Give your loan a descriptive name that you will later be able to understand.
- 'Principal' percentage is usually 100%.
- Input your 'Dealer Fee', 'Interest Rate', and the 'Duration' of the loan. For loan type, select No Payment.
In this type of a loan structure, although the homeowner is not making any payments for the first 16 months, interest is accruing, so the starting balance in the second period is higher than the original loan amount.
- Input your 'Interest Rate', and 'Duration' for the second term of the loan. Read the summary at the bottom of the pop up box to make sure your loan description is accurate.
- Click Save.