NetLoan - Principal Adjustment Gain/Loss
Principal Adjustment Gain/Loss
Use Case: The Principal Adjustment Gain/Loss can be used to make an adjustment to principal without a cash payment and is posted to your Gain/Loss account. An example would be debt forgiveness.
Prerequisites: Loan modifications must be entered in NetLoan prior to running month-end amortization for the period the new NetLoan payment falls into.
Note: Even though this isn't a cash payment, we will use the Payments section when doing a Loan Modification to record the Principal Adjustment Gain/Loss.
STEP-BY-STEP PROCESS
- Navigate to a loan record where the modification is to be recorded and click the Modify Loan button.
- On the Loan Modification click the down arrow on the Modification Type field and select Adjust Loan Terms
Option: Note you can adjust the loan term in this section if the Principal Adjustment Gain/Loss affects the remaining loan terms. To do so just input the new remaining periods in the Adjusted Remaining Loan Term field.
- Next, use the Principal Adjustment Gain/Loss payment type, select an effective date for the payment, the amount by which you would like to adjust the principal balance (a negative amount represents an increase in the loan balance and a positive amount represents a reduction in the loan balance), and if the payment is a one-time payment select One-Time in the payment frequency field, otherwise select one of the other frequency options that should apply.
Option: Note that you can also add another payment change adjusting your regular payments going forward if these are affected due to the early principal payoff or drawdown. Just select the standard payment type, the effective date of the next regular payment, the new payment amount, and the regular payment frequency.
Note: Even though this isn't a cash payment, we will use the Payments section to record the Principal Adjustment Gain/Loss.
- After double-checking inputs for the modification, click Modify Loan.
- You will be navigated back to the loan record where you can click the refresh button until the button disappears and the schedule has been updated.
- Note the additional schedule line for the principal payment on the effective modification date. Additionally, if you opted to change the remaining loan terms you will see the schedule now reflects those updated terms and if you changed the future regular payments these changes will be reflected from the effective date of that payment change onward.
- The NetLoan Payment record(s) will be saved on the Payments subtab of the loan to save historical payment changes.
- If a modification was entered in error you can select the Reverse Modification button that is located at the top of the loan record. This will reverse the modification you just made. Check out our Modification Reversals article for more information. Note: If the amortization entries for that month have been run you will no longer have the option to reverse the modification.