There is a need to have an option to do a "monthly interest calculation". Detailed requirement and example below:
There are 2 loans (with monthly installments) which are handled as follows in real-life:
February-2011 - Disbursed - 10,00,000 at 2% per month
March-2011 - Interest paid - 20,000
April-2011 - Interest paid - 20,000
May-2011 - Loan repaid paid with interest - 10,20,000
I schedule this as a loan product with interest type as "diminishing balance" and with 2 "principal-only grace" periods. This works fine in Mifos.
Loan 2: Is similar, except that the customer does some prepayments.
May-2011 - New Loan disbursed - 40,00,000 at 2% per month
June-2011 - Interest paid - 80,000
July-2011 - Interest paid - 80,000
August-2011 - Interest paid - 80,000, Principal repaid 5,00,000 (principal outstanding is now 35,00,000)
September-2011 - Interest paid - 70,000, Principal repaid 10,00,000 (principal outstanding is now 25,00,000)
October-2011 - Interest paid - 50,000, Principal repaid 15,00,000 (principal outstanding is now 10,00,000)
Nov-2011 - Interest paid - 20,000
I am not able to configure Loan-2 in Mifos. Ideally, the pre-payments should be adjusted to the principal. But mifos accounts prepayments against future interest, if I use interest type as "diminishing balance".
If I use the interest type as "diminishing balance with interest recalculation", Mifos computes the interest based on daily-reducing balance. So the interest due for Feb, will be less than interest due for April. Which will not help implementing the above scenario. And with this type of interest, Grace periods are not supported. So it is impossible to implement such a loan in Mifos.
Mifos should be enhanced and Principal Pre-payment option for "Declining Balance" and "Declinging Balance - Equal Principal Installment" interest types should be added.
The following remarks should be implemented:
a) The "Principal Re-payment" link should be visible only for "Declining Balance" and "Declinging Balance - Equal Principal Installment" interest types (this does not make sense for both "flat" and "declining balance with interest recalculation" interest types)
b) We need to handle the situation where user applies a payment for interest on a date and then on the same date does a "Principal Repayment" too.
c) We need to handle the situation where principal-repayment is done on a non-meeting date (i.e. on a date on which there is no entry in the loan_schedule table).
d) We need to handle the situation where for a six month loan, only interest was paid for 8 months and then the principal was repaid. I.e. the duration of the loan went beyond what was entered into loan_schedule table by Mifos.
e) View all account activity should show entry for "Principal Re-payments"