Example 25: Repayment Plan: Moratorium interest periods

Example 25 Scenario

This example is based on the facts in Example 24: Repayment Plan: fine tuning instalment dates and amounts. See entire scenario below for full version.

In the previous example:

•	We created a repayment plan and calculated interest exactly according to the credit supply agreement.

In this example:

•	The customer suffered hardship in the first few months of 2007 when he was in and out of hospital after a car accident and suffered consequential income loss.

•	We have decided as a public relations exercise that we will only charge 3.75% interest for the 15th January to 28th February, and 31st March to 14th April, period of 2007.

•	This will also conveniently dispose of a minor justifiable complaint the customer has about the quality of some of the goods we supplied him - the interest reduction will compensate him for that.

Demonstrated Features

►	Moratorium interest rates.

►	Examine relevant parts of the calculation result.

Points of Interest

◆	You can easily implement moratorium interest rates.

Multimedia Presentation

Click icon to watch video

Entire Scenario

There are a series of transactions on Mr Smith's account - the first one is on 16 July 2004 and the last one is on 23 November 2006, the balance is currently $6704.35.

TX DATE	DUE/AVAIL	DESCRIPTION	AMOUNT	BALANCE	PRINCIPAL	NON-PRN
16/07/2004	30/07/2004	Invoice No. 504	$950.05	$950.05	$950.05	$0.00
24/01/2005	07/02/2005	Invoice No. 505	$1,482.18	$2,432.23	$950.05	$1,482.18
12/10/2005	12/10/2005	Cheque No. 439758	$2,772.83CR	$340.60CR	$340.60CR	$0.00
11/11/2005	11/11/2005	Dishonoured Cheque Fee	$50.00	$290.60CR	$290.60CR	$0.00
05/11/2005	19/11/2005	Invoice No. 506	$1,313.14	$1,022.54	$1,022.54	$0.00
14/01/2006	28/01/2006	Invoice No. 507	$3,071.38	$4,093.92	$4,093.92	$0.00
10/04/2006	10/04/2006	Cheque No. 439759	$2,950.00CR	$1,143.92	$1,143.92	$0.00
26/05/2006	09/06/2006	Invoice No. 508	$7,076.15	$8,220.07	$8,220.07	$0.00
15/07/2006	15/07/2006	Cheque No. 439760	$1,447.98CR	$6,772.09	$6,772.09	$0.00
23/11/2006	23/11/2006	Cheque No. 439761	$67.74CR	$6,704.35	$6,704.35	$0.00

He's given a lot of business over the years and has always paid up eventually, but the account has lost too much control now.

The credit supply agreement says that interest may be charged daily at the prevailing interest rate that the store pays on its own bank overdraft account, uplifted by 10% of whatever the rate is. For example 5% becomes 5.5% (5% x 1.1). The overdraft rates, before uplift, are:

From Rate

4/4/2004 4%

5/5/2005 5%

6/6/2006 6%

7/7/2007 7%

8/8/2008 8%

These rates increase as the balance increases:

Balances Over Additional Rate

$0 0.0%

$2,000 0.2%

$4,000 0.4%

$6,000 0.6%

$8,000 0.8%

The credit supply agreement also says that if the customer's account goes into credit (i.e. the store owes the customer) the store must pay the customer interest at a static rate of 2.5%.

Interest is to be calculated daily.

Interest is not compounded.

Payments are allocated to interest, then principal, then non-principal.

The account has 14 day terms. This means that invoices bear the date of sale, but payment for any items purchased on credit is not actually due for a further 14 days. Therefore interest does not run until after the 14 days has expired.

There is a legal complication with the second transaction on the account ($1482.18). No interest is chargeable on that amount because of a flaw in the credit supply agreement that wasn't fixed until later.

No interest is chargeable on the Dishonoured cheque fee of $50 either - it isn't covered by the agreement at all.

The customer has a store credit limit of $3,000 so he has managed to exceed his credit limit by $3,704.35 even before interest is taken into account.

Rather than instituting legal proceedings and destroying the prospect of a future commercial relationship with this customer, we wish to propose a repayment plan that will reduce the debt, including interest, back to the credit limit of $3,000 by 31st March 2008.

We know from the customer's store credit application form that the customer receives income from rental property every 28 days.

We know that the rent receipts started on 10 January 2003 and have been paid every 28 days since then.

The customer says that he can pay an extra lump sum of $1,000 on 5 December 2007 when he gets paid some money due to him. We have decided that we don't require a regular instalment in the same week as the ad hoc $1,000 payment.

We wish to synchronise his instalments to us with the dates that he receives his rental income.

We believe this will increase the likelihood of compliance because the dates will be easy to remember, and money will be available before it is dissipated on other expenditure.

The customer suffered hardship in the first few months of 2007 when he was in and out of hospital after a car accident and suffered consequential income loss.

We have decided as a public relations exercise that we will only charge 3.75% interest for the 15th January to 28th February, and 31st March to 14th April, period of 2007.

This will also conveniently dispose of a minor justifiable complaint the customer has about the quality of some of the goods we supplied him - the interest reduction will compensate him for that.

The repayment plan has to take past and ongoing interest into account and the first repayment has to be the first rental date on or after 21 September 2007.

We require one payment per rent receipt date and want to give the debtor a schedule which clearly sets out the date and amount of each payment, as that minimises misunderstandings and also increases the likelihood of compliance.

Calculation Results

The results generated by the program are shown below.

Calculation Result

Example 25

SUMMARY

►	The result starts with a summary of the total interest, and assurance that the repayment plan concludes by the specified date.

Calculated repayment plan. If the proposed repayment schedule is followed then:

•	The repayment period concludes by 31/03/2008.

•	Total interest will be nine hundred and ninety-two dollars and forty-five cents ($992.45).

►	Has calculated the repayment schedule that precisely reduces the debt to $3,000 by the assigned date after taking into account interest.

•	The total amount owing as at 31/03/2008 will be three thousand dollars and zero cents ($3,000.00) comprised of principal of three thousand dollars and zero cents ($3,000.00) and accumulated interest of zero dollars and zero cents ($0.00).

►	This table conveniently sets out all the transactions before any interest is taken into account. It shows the transaction and effect on running balance.

►	You can paste this table into other documents.

►	The table - and all other parts of the report - are available as merge data fields that can be merged with your wordprocessing templates.

TRANSACTION HISTORY BEFORE INTEREST IS TAKEN INTO ACCOUNT

TX DATE	DUE/AVAIL	DESCRIPTION	AMOUNT	BALANCE	PRINCIPAL	NON-PRN
16/07/2004	30/07/2004	Invoice No. 504	$950.05	$950.05	$950.05	$0.00
24/01/2005	07/02/2005	Invoice No. 505	$1,482.18	$2,432.23	$950.05	$1,482.18
12/10/2005	12/10/2005	Cheque No. 439758	$2,772.83CR	$340.60CR	$340.60CR	$0.00
11/11/2005	11/11/2005	Dishonoured Cheque Fee	$50.00	$290.60CR	$290.60CR	$0.00
05/11/2005	19/11/2005	Invoice No. 506	$1,313.14	$1,022.54	$1,022.54	$0.00
14/01/2006	28/01/2006	Invoice No. 507	$3,071.38	$4,093.92	$4,093.92	$0.00
10/04/2006	10/04/2006	Cheque No. 439759	$2,950.00CR	$1,143.92	$1,143.92	$0.00
26/05/2006	09/06/2006	Invoice No. 508	$7,076.15	$8,220.07	$8,220.07	$0.00
15/07/2006	15/07/2006	Cheque No. 439760	$1,447.98CR	$6,772.09	$6,772.09	$0.00
23/11/2006	23/11/2006	Cheque No. 439761	$67.74CR	$6,704.35	$6,704.35	$0.00

►	This is the repayment schedule.

►	The program has calculated that the first repayment date on or after 21 Sep 07, that synchronises (28 days apart) with the rental income date of 10 Jan 2003, is Friday 12 Oct 2007.

►	Program has calculated all the repayment dates - all of which match the dates that the debtor receives his rental income.

►	It has also factored in the ad hoc payment of $1,000 on 5 December 2007.

►	We have also deleted the normal instalment that would have been due on 7 Dec 2005 so that the debtor doesn't have two payments in the same week.

►	The regular instalment of $533.19 takes interest into account.

►	There were 7 payment dates that fitted the stipulated time period and interval.

►	The instalments precisely achieve a nominal end balance of $3,000.

REPAYMENT SCHEDULE

No. Date Amount

1 Fri 12 Oct 2007 $616.13

2 Fri 9 Nov 2007 $616.13

3 Wed 5 Dec 2007 $1,000.00

4 Fri 4 Jan 2008 $616.13

5 Fri 1 Feb 2008 $616.13

6 Fri 29 Feb 2008 $616.13

7 Fri 28 Mar 2008 $616.15

Total $4,696.80

►	The second part of the report explains every step of the calculation but in table format.

►	The table can be printed or pasted into reports.

►	It is normally provided in Landscape format - it has been modified here for display on this web page.

►	It is a more compact way of narrating the calculation

INTEREST CALCULATION TABLE

The following shows how the proposed repayments interact

with calculated interest.

TX DATE	DUE/AVAIL	DESCRIPTION	DAYS	AMOUNT	BALANCE	PRINCIPAL	INTEREST	NON-PRINC
(Same)	30/07/2004	Interest rate started at 4.4% on debit balances & 2.5% on credit balances (0.01202186% & 0.0068306% per day).			$950.05DR	$950.05DR	$0.00DR	$0.00DR
(Same)	31/12/2004	Interest (30/07/2004 to 31/12/2004 inclusive) $950.05 × 0.01202186% × 155 days = $17.70.	155	$17.70DR	$967.75DR	$950.05DR	$17.70DR	$0.00DR
(Same)	01/01/2005	Days per year changed to 365. Daily interest rate now 0.01205479% on debit balances & 0.00684932% on credit balances.			$967.75DR	$950.05DR	$17.70DR	$0.00DR
24/01/2005	07/02/2005	Invoice No. 505. The transaction occurred on 24/01/2005 but was not due and payable until 07/02/2005. Entire amount added to Non-principal.		$1,482.18DR	$2,449.93DR	$950.05DR	$17.70DR	$1,482.18DR
(Same)	04/05/2005	Interest (01/01/2005 to 04/05/2005 inclusive) $950.05 × 0.01205479% × 124 days = $14.20.	124	$14.20DR	$2,464.13DR	$950.05DR	$31.90DR	$1,482.18DR
(Same)	05/05/2005	Interest rate on debit balances changed to amount-dependent rates (namely 5.5% from $0.00, then 5.72% from $2,000.00, then 5.94% from $4,000.00, then 6.16% from $6,000.00, then 6.38% from $8,000.00) (currently 0.01506849% per day).			$2,464.13DR	$950.05DR	$31.90DR	$1,482.18DR
(Same)	11/10/2005	Interest (05/05/2005 to 11/10/2005 inclusive) $950.05 × 0.01506849% × 160 days = $22.91.	160	$22.91DR	$2,487.04DR	$950.05DR	$54.81DR	$1,482.18DR
(Same)	12/10/2005	Cheque No. 439758. Payment applied partly to interest ($54.81), partly to principal ($1,235.84), and partly to Non-principal ($1,482.18).		$2,772.83CR	$285.79CR	$285.79CR	$0.00DR	$0.00DR
(Same)	11/11/2005	Dishonoured Cheque Fee. Entire amount added to principal.		$50.00DR	$235.79CR	$235.79CR	$0.00DR	$0.00DR
(Same)	18/11/2005	Interest (12/10/2005 to 18/11/2005 inclusive) $235.79CR × 0.00684932% × 38 days = $0.61CR.	38	$0.61CR	$236.40CR	$235.79CR	$0.61CR	$0.00DR
05/11/2005	19/11/2005	Invoice No. 506. The transaction occurred on 05/11/2005 but was not due and payable until 19/11/2005. Payment was applied partly to interest ($0.61) and partly to principal ($1,312.53).		$1,313.14DR	$1,076.74DR	$1,076.74DR	$0.00DR	$0.00DR
(Same)	27/01/2006	Interest (19/11/2005 to 27/01/2006 inclusive) $1,076.74 × 0.01506849% × 70 days = $11.36.	70	$11.36DR	$1,088.10DR	$1,076.74DR	$11.36DR	$0.00DR
14/01/2006	28/01/2006	Invoice No. 507. The transaction occurred on 14/01/2006 but was not due and payable until 28/01/2006. Entire amount added to principal.		$3,071.38DR	$4,159.48DR	$4,148.12DR	$11.36DR	$0.00DR
(Same)	09/04/2006	Interest (28/01/2006 to 09/04/2006 inclusive) $4,148.12 × 0.01627397% × 72 days = $48.60.	72	$48.60DR	$4,208.08DR	$4,148.12DR	$59.96DR	$0.00DR
(Same)	10/04/2006	Cheque No. 439759. Payment was applied partly to interest ($59.96) and partly to principal ($2,890.04).		$2,950.00CR	$1,258.08DR	$1,258.08DR	$0.00DR	$0.00DR
(Same)	05/06/2006	Interest (10/04/2006 to 05/06/2006 inclusive) $1,258.08 × 0.01506849% × 57 days = $10.81.	57	$10.81DR	$1,268.89DR	$1,258.08DR	$10.81DR	$0.00DR
(Same)	06/06/2006	Interest rate on debit balances changed to amount-dependent rates (namely 6.6% from $0.00, then 6.82% from $2,000.00, then 7.04% from $4,000.00, then 7.26% from $6,000.00, then 7.48% from $8,000.00) (currently 0.01808219% per day).			$1,268.89DR	$1,258.08DR	$10.81DR	$0.00DR
(Same)	08/06/2006	Interest (06/06/2006 to 08/06/2006 inclusive) $1,258.08 × 0.01808219% × 3 days = $0.68.	3	$0.68DR	$1,269.57DR	$1,258.08DR	$11.49DR	$0.00DR
26/05/2006	09/06/2006	Invoice No. 508. The transaction occurred on 26/05/2006 but was not due and payable until 09/06/2006. Entire amount added to principal.		$7,076.15DR	$8,345.72DR	$8,334.23DR	$11.49DR	$0.00DR
(Same)	14/07/2006	Interest (09/06/2006 to 14/07/2006 inclusive) $8,334.23 × 0.02049315% × 36 days = $61.49.	36	$61.49DR	$8,407.21DR	$8,334.23DR	$72.98DR	$0.00DR
(Same)	15/07/2006	Cheque No. 439760. Payment was applied partly to interest ($72.98) and partly to principal ($1,375.00).		$1,447.98CR	$6,959.23DR	$6,959.23DR	$0.00DR	$0.00DR
(Same)	22/11/2006	Interest (15/07/2006 to 22/11/2006 inclusive) $6,959.23 × 0.01989041% × 131 days = $181.33.	131	$181.33DR	$7,140.56DR	$6,959.23DR	$181.33DR	$0.00DR
(Same)	23/11/2006	Cheque No. 439761. Payment applied entirely to interest.		$67.74CR	$7,072.82DR	$6,959.23DR	$113.59DR	$0.00DR
(Same)	14/01/2007	Interest (23/11/2006 to 14/01/2007 inclusive) $6,959.23 × 0.01989041% × 53 days = $73.36.	53	$73.36DR	$7,146.18DR	$6,959.23DR	$186.95DR	$0.00DR
(Same)	15/01/2007	Commenced moratorium interest rate of 3.75% per annum (0.01027397% per day) on debit balances.			$7,146.18DR	$6,959.23DR	$186.95DR	$0.00DR
(Same)	28/02/2007	Interest (15/01/2007 to 28/02/2007 inclusive) $6,959.23 × 0.01027397% × 45 days = $32.17.	45	$32.17DR	$7,178.35DR	$6,959.23DR	$219.12DR	$0.00DR
(Same)	01/03/2007	On 01/03/2007 the interest rate on debit balances changed to amount-dependent rates (namely 6.6% from $0.00, then 6.82% from $2,000.00, then 7.04% from $4,000.00, then 7.26% from $6,000.00, then 7.48% from $8,000.00) because the moratorium interest rate that was being applied ended the day before.			$7,178.35DR	$6,959.23DR	$219.12DR	$0.00DR
(Same)	30/03/2007	Interest (01/03/2007 to 30/03/2007 inclusive) $6,959.23 × 0.01989041% × 30 days = $41.53.	30	$41.53DR	$7,219.88DR	$6,959.23DR	$260.65DR	$0.00DR
(Same)	31/03/2007	Commenced moratorium interest rate of 3.75% per annum (0.01027397% per day) on debit balances.			$7,219.88DR	$6,959.23DR	$260.65DR	$0.00DR
(Same)	14/04/2007	Interest (31/03/2007 to 14/04/2007 inclusive) $6,959.23 × 0.01027397% × 15 days = $10.72.	15	$10.72DR	$7,230.60DR	$6,959.23DR	$271.37DR	$0.00DR
(Same)	15/04/2007	On 15/04/2007 the interest rate on debit balances changed to amount-dependent rates (namely 6.6% from $0.00, then 6.82% from $2,000.00, then 7.04% from $4,000.00, then 7.26% from $6,000.00, then 7.48% from $8,000.00) because the moratorium interest rate that was being applied ended the day before.			$7,230.60DR	$6,959.23DR	$271.37DR	$0.00DR
(Same)	06/07/2007	Interest (15/04/2007 to 06/07/2007 inclusive) $6,959.23 × 0.01989041% × 83 days = $114.89.	83	$114.89DR	$7,345.49DR	$6,959.23DR	$386.26DR	$0.00DR
(Same)	07/07/2007	Interest rate on debit balances changed to amount-dependent rates (namely 7.7% from $0.00, then 7.92% from $2,000.00, then 8.14% from $4,000.00, then 8.36% from $6,000.00, then 8.58% from $8,000.00) (currently 0.02290411% per day).			$7,345.49DR	$6,959.23DR	$386.26DR	$0.00DR
(Same)	12/10/2007	Interest (07/07/2007 to 12/10/2007 inclusive) $6,959.23 × 0.02290411% × 98 days = $156.21.	98	$156.21DR	$7,501.70DR	$6,959.23DR	$542.47DR	$0.00DR
(Same)	12/10/2007	Proposed repayment #1. The payment will be applied partly to principal ($73.66), and partly to interest ($542.47).		$616.13CR	$6,885.57DR	$6,885.57DR	$0.00DR	$0.00DR
(Same)	09/11/2007	Interest (13/10/2007 to 09/11/2007 inclusive) $6,885.57 × 0.02290411% × 28 days = $44.16.	28	$44.16DR	$6,929.73DR	$6,885.57DR	$44.16DR	$0.00DR
(Same)	09/11/2007	Proposed repayment #2. The payment will be applied partly to principal ($571.97), and partly to interest ($44.16).		$616.13CR	$6,313.60DR	$6,313.60DR	$0.00DR	$0.00DR
(Same)	05/12/2007	Interest (10/11/2007 to 05/12/2007 inclusive) $6,313.60 × 0.02290411% × 26 days = $37.60.	26	$37.60DR	$6,351.20DR	$6,313.60DR	$37.60DR	$0.00DR
(Same)	05/12/2007	Proposed repayment #3. The payment will be applied partly to principal ($962.40), and partly to interest ($37.60).		$1,000.00CR	$5,351.20DR	$5,351.20DR	$0.00DR	$0.00DR
(Same)	31/12/2007	Interest (06/12/2007 to 31/12/2007 inclusive) $5,351.20 × 0.02230137% × 26 days = $31.03.	26	$31.03DR	$5,382.23DR	$5,351.20DR	$31.03DR	$0.00DR
(Same)	01/01/2008	Days per year changed to 366. Daily interest rate now 0.02224044% on debit balances & 0.0068306% on credit balances.			$5,382.23DR	$5,351.20DR	$31.03DR	$0.00DR
(Same)	04/01/2008	Interest (01/01/2008 to 04/01/2008 inclusive) $5,351.20 × 0.02224044% × 4 days = $4.76.	4	$4.76DR	$5,386.99DR	$5,351.20DR	$35.79DR	$0.00DR
(Same)	04/01/2008	Proposed repayment #4. The payment will be applied partly to principal ($580.34), and partly to interest ($35.79).		$616.13CR	$4,770.86DR	$4,770.86DR	$0.00DR	$0.00DR
(Same)	01/02/2008	Interest (05/01/2008 to 01/02/2008 inclusive) $4,770.86 × 0.02224044% × 28 days = $29.71.	28	$29.71DR	$4,800.57DR	$4,770.86DR	$29.71DR	$0.00DR
(Same)	01/02/2008	Proposed repayment #5. The payment will be applied partly to principal ($586.42), and partly to interest ($29.71).		$616.13CR	$4,184.44DR	$4,184.44DR	$0.00DR	$0.00DR
(Same)	29/02/2008	Interest (02/02/2008 to 29/02/2008 inclusive) $4,184.44 × 0.02224044% × 28 days = $26.06.	28	$26.06DR	$4,210.50DR	$4,184.44DR	$26.06DR	$0.00DR
(Same)	29/02/2008	Proposed repayment #6. The payment will be applied partly to principal ($590.07), and partly to interest ($26.06).		$616.13CR	$3,594.37DR	$3,594.37DR	$0.00DR	$0.00DR
(Same)	28/03/2008	Interest (01/03/2008 to 28/03/2008 inclusive) $3,594.37 × 0.02163934% × 28 days = $21.78.	28	$21.78DR	$3,616.15DR	$3,594.37DR	$21.78DR	$0.00DR
(Same)	28/03/2008	Proposed repayment #7. The payment will be applied partly to principal ($594.37), and partly to interest ($21.78).		$616.15CR	$3,000.00DR	$3,000.00DR	$0.00DR	$0.00DR
		Final Balance	1338		$3,000.00DR	$3,000.00DR	$0.00DR	$0.00DR

NOTIONAL INTEREST CALCULATION

The following describes how the proposed repayments interact

with calculated interest.

►	Every step of the calculation is then explained, this allows external verification of the calculation's accuracy, thus amplifying the evidential integrity of the result and ensuring that your opponent cannot raise doubt as to the calculation's accuracy.

►	The first line sets out the starting principal, the starting debit and credit interest rates, and the number of days per year used to convert the annual interest rate into a daily interest rate.

►	In this case there are amount-dependent rates so the relevant interest brackets have been stated.

►	Notice that it multiplied all base rates by 1.1 as stipulated.

►	The narrative accounts for past transactions and interest.

►	It then calculates and enters the notional payment dates.

►	It calculates interest on that basis of all past and notional future payments.

►	It calculates the exact instalment that will meet the repayment criteria.

(a) On 30/07/2004 the opening principal was $950.05, the interest rate on debit balances was amount-dependent rates (namely 4.4% from $0.00, then 4.62% from $2,000.00, then 4.84% from $4,000.00, then 5.06% from $6,000.00, then 5.28% from $8,000.00), the interest rate on credit balances was 2.5% per annum, and the days per year base used to convert the annual interest rates into daily interest rates was 366.

►	This paragraph clearly states the order in which payments are applied to principal and interest.

►	This order can significantly affect the amount of interest

(b) Debits and Credits are each applied to interest then to principal then to non-principal.

►	An interest calculation is made immediately before any calculation parameter changes.

►	In this instance, the daily interest rate is about to change because the days per year divisor is about to change.

►	This is because the Calendar Year option has been selected.

►	The paragraph sets out the calculation in complete detail, including the adjustment to the balance of interest.

►	It has correctly applied the interest rate bracket of 4%.

(c) Calculated interest on 31/12/2004 because it was the last day before the days per year base changed (from 366 to 365) on 01/01/2005. Interest on $950.05 (principal) at 4.4% per annum × 155 days (30/07/2004 to 31/12/2004 inclusive) ÷ 366 (days per year) is $17.70, resulting in a new unpaid interest balance of $17.70 ($0.00 plus $17.70).

►	This paragraph explains what changed, and gives the new daily rate of interest.

(d) On 01/01/2005 the days per year base used to convert the annual interest rate into the daily interest rate changed to 365. The daily interest rate is now 0.01205479% on debit balances & 0.00684932% on credit balances.

►	The paragraph records that the transaction occurred on 24/1/05 but was not due and payable until 7/2/05.

►	Interest is calculated from 7/2/05 not 24/1/05.

►	This paragraph shows that the invoice did not increase principal, it increased non-principal instead. This was the invoice that wasn't subject to interest.

(e) Debit on 07/02/2005: "Invoice No. 505" $1,482.18. The transaction occurred on 24/01/2005 but was not due and payable until 07/02/2005. The entire amount was added to Non-principal, leaving a new Non-principal balance of $1,482.18 ($0.00 plus $1,482.18).

(f) Calculated interest on 04/05/2005 because it was the last day before the interest rate changed on 05/05/2005. Interest on $950.05 (principal) at 4.4% per annum × 124 days (01/01/2005 to 04/05/2005 inclusive) ÷ 365 (days per year) is $14.20, resulting in a new unpaid interest balance of $31.90 ($17.70 plus $14.20).

(g) On 05/05/2005 the interest rate on debit balances changed to amount-dependent rates (namely 5.5% from $0.00, then 5.72% from $2,000.00, then 5.94% from $4,000.00, then 6.16% from $6,000.00, then 6.38% from $8,000.00).

►	This paragraph explains a calculation step. It says why it is necessary and explains how the balance of interest changed.

►	This step is needed because the balance of principal on which interest is calculated was about to change.

(h) Calculated interest on 11/10/2005 because it was the last day before the balance of principal changed on 12/10/2005. Interest on $950.05 (principal) at 5.5% per annum × 160 days (05/05/2005 to 11/10/2005 inclusive) ÷ 365 (days per year) is $22.91, resulting in a new unpaid interest balance of $54.81 ($31.90 plus $22.91).

►	Here is a payment. The calculation has allocated the credit against three classes of transactions.

►	It has applied the payment in the correct order against interest, principal then non-principal.

►	"Non-principal" refers to amounts on which no interest is said to be payable.

►	The program has correctly split the payment in accordance with the stipulated payment application order.

►	If you look closely at the split you might initially think that it is incorrect.

►	The order is interest then principal then non-principal - and yet the left over balance appears to have been given to middle-order principal, not final-order non-principal.

►	This is because the payment was applied in that order to all available debit balances. At the end of that step each of interest, principal and non-principal had been reduced to $0 and there was $285.79 left over.

►	Where should that credit go? The payment had its 'subject to interest' flag set, so it goes to principal, not non-principal.

►	This left a credit balance of principal, and a $0 balance of non-principal.

►	Calin Professional makes an otherwise complicated and tedious operation easy to do and easy to understand.

(i) Credit on 12/10/2005: "Cheque No. 439758" $2,772.83CR. The payment was applied partly to interest ($54.81), partly to principal ($1,235.84), and partly to Non-principal ($1,482.18). This left a new unpaid interest balance of $0.00 ($54.81 minus $54.81), a new principal balance of $285.79CR ($950.05 minus $1,235.84), and a new Non-principal balance of $0.00 ($1,482.18 minus $1,482.18).

►	The $50 is not subject to interest - but it was added to principal.

►	Why is that?

►	The reason is that with the different transaction due dates in this case, there was an outstanding credit principal balance on the day of this transaction.

►	Therefore the $50 had to be used to reduce that credit. It doesn't make sense to create a non-principal debit when the overall account is in credit.

►	The program has spared you from having to work out this deceptively complex scenario.

(j) Debit on 11/11/2005: "Dishonoured Cheque Fee" $50.00. The entire amount was added to principal, leaving a new principal balance of $235.79CR ($285.79CR plus $50.00).

►	Program correctly applies the static Credit rate of interest because the overall balance is in Credit.

(k) Calculated interest on 18/11/2005 because it was the last day before the balance of principal changed on 19/11/2005. Interest on $235.79CR (principal) at 2.5% per annum × 38 days (12/10/2005 to 18/11/2005 inclusive) ÷ 365 (days per year) is $0.61CR, resulting in a new unpaid interest balance of $0.61CR ($0.00 plus $0.61CR).

(l) Debit on 19/11/2005: "Invoice No. 506" $1,313.14. The transaction occurred on 05/11/2005 but was not due and payable until 19/11/2005. The amount was applied partly to interest ($0.61) and partly to principal ($1,312.53) leaving a new unpaid interest balance of $0.00 ($0.61CR plus $0.61) and a new principal balance of $1,076.74 ($235.79CR plus $1,312.53).

(m) Calculated interest on 27/01/2006 because it was the last day before the balance of principal changed on 28/01/2006. Interest on $1,076.74 (principal) at 5.5% per annum × 70 days (19/11/2005 to 27/01/2006 inclusive) ÷ 365 (days per year) is $11.36, resulting in a new unpaid interest balance of $11.36 ($0.00 plus $11.36).

(n) Debit on 28/01/2006: "Invoice No. 507" $3,071.38. The transaction occurred on 14/01/2006 but was not due and payable until 28/01/2006. The entire amount was added to principal, leaving a new principal balance of $4,148.12 ($1,076.74 plus $3,071.38).

(o) Calculated interest on 09/04/2006 because it was the last day before the balance of principal changed on 10/04/2006. Interest on $4,148.12 (principal) at 5.94% per annum × 72 days (28/01/2006 to 09/04/2006 inclusive) ÷ 365 (days per year) is $48.60, resulting in a new unpaid interest balance of $59.96 ($11.36 plus $48.60).

(p) Credit on 10/04/2006: "Cheque No. 439759" $2,950.00CR. The payment was applied partly to interest ($59.96) and partly to principal ($2,890.04) leaving a new unpaid interest balance of $0.00 ($59.96 minus $59.96) and a new principal balance of $1,258.08 ($4,148.12 minus $2,890.04).

(q) Calculated interest on 05/06/2006 because it was the last day before the interest rate changed on 06/06/2006. Interest on $1,258.08 (principal) at 5.5% per annum × 57 days (10/04/2006 to 05/06/2006 inclusive) ÷ 365 (days per year) is $10.81, resulting in a new unpaid interest balance of $10.81 ($0.00 plus $10.81).

►	Program states the new set of bracketed interest rates.

(r) On 06/06/2006 the interest rate on debit balances changed to amount-dependent rates (namely 6.6% from $0.00, then 6.82% from $2,000.00, then 7.04% from $4,000.00, then 7.26% from $6,000.00, then 7.48% from $8,000.00).

(s) Calculated interest on 08/06/2006 because it was the last day before the balance of principal changed on 09/06/2006. Interest on $1,258.08 (principal) at 6.6% per annum × 3 days (06/06/2006 to 08/06/2006 inclusive) ÷ 365 (days per year) is $0.68, resulting in a new unpaid interest balance of $11.49 ($10.81 plus $0.68).

(t) Debit on 09/06/2006: "Invoice No. 508" $7,076.15. The transaction occurred on 26/05/2006 but was not due and payable until 09/06/2006. The entire amount was added to principal, leaving a new principal balance of $8,334.23 ($1,258.08 plus $7,076.15).

(u) Calculated interest on 14/07/2006 because it was the last day before the balance of principal changed on 15/07/2006. Interest on $8,334.23 (principal) at 7.48% per annum × 36 days (09/06/2006 to 14/07/2006 inclusive) ÷ 365 (days per year) is $61.49, resulting in a new unpaid interest balance of $72.98 ($11.49 plus $61.49).

(v) Credit on 15/07/2006: "Cheque No. 439760" $1,447.98CR. The payment was applied partly to interest ($72.98) and partly to principal ($1,375.00) leaving a new unpaid interest balance of $0.00 ($72.98 minus $72.98) and a new principal balance of $6,959.23 ($8,334.23 minus $1,375.00).

(w) Calculated interest on 22/11/2006 because it was the last day before the balance of principal changed on 23/11/2006. Interest on $6,959.23 (principal) at 7.26% per annum × 131 days (15/07/2006 to 22/11/2006 inclusive) ÷ 365 (days per year) is $181.33, resulting in a new unpaid interest balance of $181.33 ($0.00 plus $181.33).

(x) Credit on 23/11/2006: "Cheque No. 439761" $67.74CR. The payment was applied entirely to interest, leaving a new unpaid interest balance of $113.59 ($181.33 minus $67.74).

►	In this paragraph an interest calculation step is being made in preparation for the start of the moratorium interest rate tomorrow.

(y) Calculated interest on 14/01/2007 because it was the last day before the interest rate changed on 15/01/2007. Interest on $6,959.23 (principal) at 7.26% per annum × 53 days (23/11/2006 to 14/01/2007 inclusive) ÷ 365 (days per year) is $73.36, resulting in a new unpaid interest balance of $186.95 ($113.59 plus $73.36).

►	The program implements the moratorium interest rate period, and explains it in plain English.

(z) On 15/01/2007 the interest rate on debit balances changed to 3.75% per annum because a moratorium interest rate started.

(aa) Calculated interest on 28/02/2007 because it was the last day before the interest rate changed on 01/03/2007. Interest on $6,959.23 (principal) at 3.75% per annum × 45 days (15/01/2007 to 28/02/2007 inclusive) ÷ 365 (days per year) is $32.17, resulting in a new unpaid interest balance of $219.12 ($186.95 plus $32.17).

►	Program is resuming the pre-moratorium interest rate, and spells out what the rates are so you can continue to follow the calculations.

(ab) On 01/03/2007 the interest rate on debit balances changed to amount-dependent rates (namely 6.6% from $0.00, then 6.82% from $2,000.00, then 7.04% from $4,000.00, then 7.26% from $6,000.00, then 7.48% from $8,000.00) because the moratorium interest rate that was being applied ended the day before.

►	In this paragraph an interest calculation step is being made in preparation for the start of the moratorium interest rate tomorrow.

(ac) Calculated interest on 30/03/2007 because it was the last day before the interest rate changed on 31/03/2007. Interest on $6,959.23 (principal) at 7.26% per annum × 30 days (01/03/2007 to 30/03/2007 inclusive) ÷ 365 (days per year) is $41.53, resulting in a new unpaid interest balance of $260.65 ($219.12 plus $41.53).

►	The program implements the moratorium interest rate period, and explains it in plain English

(ad) On 31/03/2007 the interest rate on debit balances changed to 3.75% per annum because a moratorium interest rate started.

(ae) Calculated interest on 14/04/2007 because it was the last day before the interest rate changed on 15/04/2007. Interest on $6,959.23 (principal) at 3.75% per annum × 15 days (31/03/2007 to 14/04/2007 inclusive) ÷ 365 (days per year) is $10.72, resulting in a new unpaid interest balance of $271.37 ($260.65 plus $10.72).

►	Program is resuming the pre-moratorium interest rate, and spells out what the rates are so you can continue to follow the calculations.

(af) On 15/04/2007 the interest rate on debit balances changed to amount-dependent rates (namely 6.6% from $0.00, then 6.82% from $2,000.00, then 7.04% from $4,000.00, then 7.26% from $6,000.00, then 7.48% from $8,000.00) because the moratorium interest rate that was being applied ended the day before.

(ag) Calculated interest on 06/07/2007 because it was the last day before the interest rate changed on 07/07/2007. Interest on $6,959.23 (principal) at 7.26% per annum × 83 days (15/04/2007 to 06/07/2007 inclusive) ÷ 365 (days per year) is $114.89, resulting in a new unpaid interest balance of $386.26 ($271.37 plus $114.89).

(ah) On 07/07/2007 the interest rate on debit balances changed to amount-dependent rates (namely 7.7% from $0.00, then 7.92% from $2,000.00, then 8.14% from $4,000.00, then 8.36% from $6,000.00, then 8.58% from $8,000.00).

(ai) Calculated interest on 12/10/2007. Interest on $6,959.23 (principal) at 8.36% per annum × 98 days (07/07/2007 to 12/10/2007 inclusive) ÷ 365 (days per year) is $156.21, resulting in a new unpaid interest balance of $542.47 ($386.26 plus $156.21).

►	Here is the first notional repayment. The program enters each one, and numbers it for your convenience.

(aj) Proposed repayment #1 ($616.13) on 12/10/2007: The payment will be applied partly to principal ($73.66), and partly to interest ($542.47) leaving a new principal balance of $6,885.57 ($6,959.23 minus $73.66), and a new unpaid interest balance of $0.00 ($542.47 minus $542.47).

►	Narration accounts for interest left in wake of the first repayment.

(ak) Calculated interest on 09/11/2007. Interest on $6,885.57 (principal) at 8.36% per annum × 28 days (13/10/2007 to 09/11/2007 inclusive) ÷ 365 (days per year) is $44.16, resulting in a new unpaid interest balance of $44.16 ($0.00 plus $44.16).

►	Here is the next notional repayment.

(al) Proposed repayment #2 ($616.13) on 09/11/2007: The payment will be applied partly to principal ($571.97), and partly to interest ($44.16) leaving a new principal balance of $6,313.60 ($6,885.57 minus $571.97), and a new unpaid interest balance of $0.00 ($44.16 minus $44.16).

(am) Calculated interest on 05/12/2007. Interest on $6,313.60 (principal) at 8.36% per annum × 26 days (10/11/2007 to 05/12/2007 inclusive) ÷ 365 (days per year) is $37.60, resulting in a new unpaid interest balance of $37.60 ($0.00 plus $37.60).

►	Here is the ad hoc payment of $1,000 being taken into account. Notice that there isn't another repayment this week - we've deliberately skipped it - even though should be a regular payment on 7 Dec 2007.

(an) Proposed repayment #3 ($1,000.00) on 05/12/2007: The payment will be applied partly to principal ($962.40), and partly to interest ($37.60) leaving a new principal balance of $5,351.20 ($6,313.60 minus $962.40), and a new unpaid interest balance of $0.00 ($37.60 minus $37.60).

(ao) Calculated interest on 31/12/2007 because it was the last day before the days per year base changed (from 365 to 366) on 01/01/2008. Interest on $5,351.20 (principal) at 8.14% per annum × 26 days (06/12/2007 to 31/12/2007 inclusive) ÷ 365 (days per year) is $31.03, resulting in a new unpaid interest balance of $31.03 ($0.00 plus $31.03).

(ap) On 01/01/2008 the days per year base used to convert the annual interest rate into the daily interest rate changed to 366. The daily interest rate is now 0.02224044% on debit balances & 0.0068306% on credit balances.

(aq) Calculated interest on 04/01/2008. Interest on $5,351.20 (principal) at 8.14% per annum × 4 days (01/01/2008 to 04/01/2008 inclusive) ÷ 366 (days per year) is $4.76, resulting in a new unpaid interest balance of $35.79 ($31.03 plus $4.76).

(ar) Proposed repayment #4 ($616.13) on 04/01/2008: The payment will be applied partly to principal ($580.34), and partly to interest ($35.79) leaving a new principal balance of $4,770.86 ($5,351.20 minus $580.34), and a new unpaid interest balance of $0.00 ($35.79 minus $35.79).

(as) Calculated interest on 01/02/2008. Interest on $4,770.86 (principal) at 8.14% per annum × 28 days (05/01/2008 to 01/02/2008 inclusive) ÷ 366 (days per year) is $29.71, resulting in a new unpaid interest balance of $29.71 ($0.00 plus $29.71).

(at) Proposed repayment #5 ($616.13) on 01/02/2008: The payment will be applied partly to principal ($586.42), and partly to interest ($29.71) leaving a new principal balance of $4,184.44 ($4,770.86 minus $586.42), and a new unpaid interest balance of $0.00 ($29.71 minus $29.71).

(au) Calculated interest on 29/02/2008. Interest on $4,184.44 (principal) at 8.14% per annum × 28 days (02/02/2008 to 29/02/2008 inclusive) ÷ 366 (days per year) is $26.06, resulting in a new unpaid interest balance of $26.06 ($0.00 plus $26.06).

(av) Proposed repayment #6 ($616.13) on 29/02/2008: The payment will be applied partly to principal ($590.07), and partly to interest ($26.06) leaving a new principal balance of $3,594.37 ($4,184.44 minus $590.07), and a new unpaid interest balance of $0.00 ($26.06 minus $26.06).

(aw) Calculated interest on 28/03/2008. Interest on $3,594.37 (principal) at 7.92% per annum × 28 days (01/03/2008 to 28/03/2008 inclusive) ÷ 366 (days per year) is $21.78, resulting in a new unpaid interest balance of $21.78 ($0.00 plus $21.78).

(ax) Proposed repayment #7 ($616.15) on 28/03/2008: The payment will be applied partly to principal ($594.37), and partly to interest ($21.78) leaving a new principal balance of $3,000.00 ($3,594.37 minus $594.37), and a new unpaid interest balance of $0.00 ($21.78 minus $21.78).

(ay) Total amount owing as at 28/03/2008 will be $3,000.00 comprising principal $3,000.00 plus accumulated interest $0.00.

(az) Interest on $3,000.00 will continue to accumulate at zero dollars and sixty-five cents ($0.65) per day.

►	This report is a convenient schedule that you can use to send the debtor.

►	Alternatively all the field values have been output to a merge data file so you can merge the data with your own wordprocessing precedents.

DEFERRAL OF LEGAL ACTION - AGREED REPAYMENT SCHEDULE

Deferral of legal action has been agreed on the condition that you strictly comply with the following repayment plan.

If you don't strictly comply with this plan then legal action can be instituted against you without further notice. Proceedings can be for recovery of the total liability (including interest and costs), or some lesser amount - for example the amount of any overdue instalment(s).

Please keep this timetable in a prominent place and ensure that each payment is made by the specified date and in the designated amount.

Please note that the repayment amounts take into account ongoing interest, and credit for each payment received. We will provide full details of that calculation if requested.

No. Date Amount

1 Fri 12 Oct 2007 $616.13

2 Fri 9 Nov 2007 $616.13

3 Wed 5 Dec 2007 $1,000.00

4 Fri 4 Jan 2008 $616.13

5 Fri 1 Feb 2008 $616.13

6 Fri 29 Feb 2008 $616.13

7 Fri 28 Mar 2008 $616.15

Total $4,696.80

►	The third part of the report provides details about the calculation.

►	This is to complete the program's policy of exposing every factor that affects the calculation.

►	It also provides useful information about optional settings, and how they might be reviewed.

Calculation Notes

The following information is provided to give you a complete understanding of the calculation, so even the finest details are available if ever needed.

►	Once you are familiar with the program you will see that some settings are default settings (eg in an interest rates file) that can be overridden.

►	This paragraph gives the status of that.

1. The debit interest rates have been taken from the debit rates file (my overdraft rates no 2).

2. The main calculation options (such as days per year, credit application order and rounding) have been taken from the debit rates file where they are embedded as part of the rates specification. These options can be changed for individual calculations in Settings|Options, or for all new cases in Settings|Setup.

3. The credit interest rates (if required) have been taken from the settings on the main form.

4. The debit file rate definition has been partially modified (overridden) on the main form.

►	This paragraph gives pertinent advice about accuracy of the repayment calculator.

5. The accuracy of the repayment plan instalment calculator depends in part on the setting you give for "Maximum Iterations" because the calculator stops trying after that many attempts. If a calculation is not accurate enough - for example there is a balance left over at the end - then try increasing the number by at least 10.

►	This paragraph tells you the number of decimal places you have selected for rounding interest rates.

►	There are times when there are legislative or contractual rules about this factor.

6. Decimal Rounding. When converting from an annual rate of interest to a daily rate of interest, and except if overridden in an interest rates file, the program has rounded-up to 8 decimal places, eg 8.12512324924555 is rounded to 8.12512325%. You can change the setting in Settings|Options.

►	This paragraph demonstrates just one of many warnings and insights the program will give you.

►	It explains that the Calendar Year option has been selected and that it complicates the calculation.

7. Calendar Year. You are using the "Calendar Year" method for converting the annual interest rate to the daily interest rate. In many cases this is the most accurate setting but you should be aware that it adds complexity to the calculation report because it requires additional interest calculations before and after each leap year. If you require a simpler report and it is appropriate to do so then choose a different setting. The setting is either embedded in the Options section of the selected interest rate file or else it is set in Settings|Options on the main form. In either case you can change or override the setting for a particular calculation in Settings|Options. Please note that such settings only apply to the current calculation. You can change the default value that affects all new calculations in Settings|Setup. The default value cannot however automatically override any setting in the Options part of an interest rate file - you still have to override on an individual basis as explained above.