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Multiple Interest Types (Fixed, Reducing, Flat, Penalty)

PrismERP provides support for multiple interest calculation methods to meet diverse loan structuring requirements. This ensures precise financial management and flexibility in repayment schedules.

Supported Interest Types​

  1. Fixed Interest

    • A constant interest amount calculated on the entire loan principal.
    • The total interest is predetermined and remains unchanged throughout the loan tenure.
    • Ideal for predictable repayment planning.

  2. Reducing Balance Interest

    • Interest is calculated on the outstanding loan balance after each installment.
    • As the principal reduces, the interest amount payable decreases over time.
    • Commonly used for EMI-based personal or business loans.

  3. Flat Interest

    • Interest is calculated on the entire loan amount throughout the loan period, regardless of principal repayment.
    • Results in a higher total interest cost compared to reducing balance method.
    • Frequently used in short-term consumer loans.

  4. Penalty Interest

    • Applied in cases of overdue or late payments.
    • Can be set as a fixed amount or percentage over the normal rate.
    • Ensures borrower accountability and encourages timely repayment.

Configuration in PrismERP​

  • Interest types can be selected while setting up loan products in PrismERP.
  • Each loan record stores the configured interest type, ensuring accurate EMI calculation and accounting.
  • Interest types are fully integrated with:
    • General Ledger
    • Budgeting
    • Accounts Receivable
    • Loan Repayment Schedules

This modular setup supports all institutional lending models, from microfinance to enterprise project loans.