Payoff Balance and Current Balance for Loans
As described under Current Amount versus Payoff Amount, a loan service agreement's current balance and payoff balance differ during the lifetime of the loan. Current balance contains how much the customer owes to remain current (typically their periodic payment amount), and payoff balance contains the amount the customer would have to pay to payoff the loan (typically the principal balance plus any accrued interest charges).
Unlike other SAs, loans have two accounts receivable distribution codes: long term and short term. These two codes allow the general ledger to differentiate between unbilled loan receivables (long term) and billed loan receivables (short term). The current balance for a loan is always the amount of the short-term receivables. The payoff balance for a loan is always the net of the short-term receivables and the long-term receivables.
If the SA has a special role of Loan, the financial transaction algorithms supplied with the base package transfer the current amount between the long-term receivables and the short-term receivables in the GL. For example, when a bill segment is generated for the loan SA, the amount of the periodic payment is transferred from the long-term receivables to the short-term receivables. Don't worry, the examples in the following sections show exactly what these transactions look like.
An operator can see the how the bills, payments and adjustments have affected the GL, current balance and payoff balance using SA Financial History.
The following sections provide examples of how adjustments, bills and payments are recorded in the GL and the subsequent effect on the current and payoff balances. When reading the examples, remember that the payoff balance is always the net of the short-term receivable and the long-term receivable balances.
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