NetLoan - Loan Balance Adjustment

Loan Balance Adjustment

Overview: Throughout the duration of the loan, there may be instances where the loan balance needs to be adjusted down (loan forgiveness). This can be accomplished in NetLoan with an "Adjust Loan Balance" modification.

Prerequisites: Loan balance adjustments must be entered in NetLoan prior to month-end amortization entries. Loans must also be commenced in order to modify.

Step-by-Step Process

  • If viewing the loan record, select Modify.


  • If not viewing the loan record, navigate to NetLoan > Loan Management > Modification Register > New.

  • Select Adjust Loan Balance as the "Modification Type".

  • Input the amount that the loan balance is to be adjusted by. Input the amount as a negative number to decrease the loan balance (loan forgiveness).

  • The Loan Adjustment Gain/Loss Account field will be automatically populated with the account listed on the Loan Type record for Gain/Loss on Loan Transactions. However, the account to be used to record the decrease in loan balance can be changed on the modification record if needed.
  • Select Modify Loan to save the loan balance adjustment.

  • At this point in the modification, there are two options:

Option 1: Keep the original monthly payment amount (maturity date changes)

  • This happens automatically when the "Adjust Loan Balance" modification is made. No further modification needed.
  • As seen in the example below, the monthly payment amount is the same pre- and post-modification ($4,432.06). Only the final payment differs (bringing the loan balance to zero). The maturity date has automatically adjusted; the loan is now 22 periods total instead of 24.


Option 2: Keep the original maturity date (monthly payment amount changes)

  • This option requires an additional modification.
  • From the loan record, select Modify.


  • Select Adjust Loan Terms as the "Modification Type".
  • Change the "Adjusted Maturity Date" back to the original maturity date.

  • Add a new payment line, with the "Payment Type" as Standard. Give the new payment line an "Effective Date" that matches the date of the modification. Insert the new monthly payment amount, and give it a "Payment Frequency" of Monthly. Select Add.

  • Select Modify Loan.


  • Regenerate the schedule and note that the new payment amount begins after the modification (i.e. $3,690.70).

  • Also, note that the loan now ends on the original maturity date (i.e. 12/31/2023).

  •   If a modification was entered in error you can select the Reverse Modification button that is located at the top of the lease record. This will reverse the modification you just made. Check out our Modification Reversal 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.

NOTE: For users attempting to add additional debt, please read the following. The "Adjust Loan Balance" modification type will currently allow you to input a positive amount in the Adjustment Amount field. This would cause the modification entry to book a loss (for borrowers) or a gain (for lenders). The Loan Adjustment Gain/Loss Account field can be changed to hit the origination clearing account to correct the accounting for additional debt. However, if a user is attempting to modify the loan to add additional debt, the "Adjust Loan Terms" modification type should be used, and a "Principal Adjustment Payment" should be added. See the article linked below for additional details on creating this type of modification:

Loan Payment Adjustment Overview




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