How to Handle Prepaid Interest

When your previous system's payments indicate you've prepaid interest, this is currently a workaround for Bryt as it does not handle interest that is not yet due.

Our example loan is a starting balance of $100,000, Periodic/360 (30 days for each month regardless of actual days), 12% rate, 12 months (terms), giving us a fully amortized loan with $8,884.88 due per pay period.

We'll say the borrower prepaid $500 on 4/15/24 using this loan as an example.

3 Steps

1) Record the prepaid amount as an unscheduled payment (Unscheduled payments can only occur within an active/open pay period, using the example above, the open date range is 4/1/24-4/30/24).
You'll want to set this $500 'prepaid interest' amount to the Hold account. 

By default, the $500 will show as being applied to Principal but we want to set it to the Hold account. You'll delete the $500 in the principal row, then enter it under the Hold account row.  

2) Record the regular scheduled payment's full total due amount minus the amount that was set to the hold account in step 1.

You'll click 'Enter Manually' on this page tounderpay interest instead of underpaying principal as it notes. 
This way the period's full principal due amount will get paid and the unpaid interest will show as a Balance amount for the Interest row (itgets set to 'Outstanding Interest' and shows as a Balance on the loan's Summary page). 

Loan Summary Page for reference:

3) Now you'll record an unscheduled payment to match the Payment date for the 'Regular Scheduled Payment' in step 2, which will use the Hold account as the Payment Source and be applied toward the 'Outstanding Interest Amount'.

Again, by default, the system will apply it to the Principal balance but we'll be setting the $500 to 'Outstanding Interest' which will pay down the interest balance amount that was set in step 2. 

Now on the loan's Summary Loan Balances section, you'll see no more balances for Interest or for the Hold account.

Schedule's Result:

This is the workaround we suggest for handling 'prepaid interest'. If you have any questions, please let us know via email support@brytsoftware.com.