How a repayment is recorded

A customer’s money reaching a loan lands on the transaction list as a Repayment.

This article says what a repayment settles, and answers the question customers ask most: “I paid 1,000, so why has my loan only come down by 600?”

Nobody selects a repayment. Both ways of making one belong to the system, so neither appears in the account’s list of actions. They are here so the movement has a name and an explanation when you find one.

The two ways money arrives

Both post the same movement. The Source column on the transaction list is what tells them apart — see reading the transaction list.

Source	Where the money came from	Is a collection raised?
Debit order	Collected from the customer’s bank account	Yes. The collection goes out first, and the repayment posts when it settles
Bank deposit	The customer paid your organisation’s bank directly	No. The cash is already in, so there is nothing to collect

The debit-order side carries the bank account it was collected from, so that account shows on the entry. The bank-deposit side carries none, because nobody chose one.

Which products accept each of these is part of your organisation’s product setup. See payments on an account.

flowchart TD
    D["Debit order raised<br/>against the customer's bank"] --> S["The collection settles"]
    B["Customer pays your<br/>organisation's bank"] --> A["The deposit is allocated<br/>to this account"]
    S --> R["Repayment"]
    A --> R
    R --> BAL["The balance comes down<br/>by the full amount"]
    R --> ARR["Arrears comes down<br/>by the full amount"]
    style D fill:#1e3a5f,color:#ffffff
    style B fill:#1e3a5f,color:#ffffff
    style S fill:#0e7490,color:#ffffff
    style A fill:#0e7490,color:#ffffff
    style R fill:#059669,color:#ffffff
    style BAL fill:#7c3aed,color:#ffffff
    style ARR fill:#7c3aed,color:#ffffff

A repayment is not divided up

There is no order of appropriation on a loan. A repayment is not split between arrears, then interest, then fees, then principal.

The whole amount comes off the loan balance, and the whole amount comes off arrears. One movement, both effects, in full.

That is only sound because interest and fees have already joined the balance before the money arrives:

What the loan charges	Where it goes
Daily interest	Accrued interest, in its own balance
Accrued interest, on the interest anniversary	Capitalised into the loan balance
A service fee, an initiation fee, tax on a fee	Charged straight to the loan balance

So by the time a customer pays, there is one balance to reduce and no buckets to rank. See how interest is calculated and compounding and capitalisation.

Arrears is not a second debt

Arrears is a memo of the slice of the balance that has fallen due and has not been paid. It is not money owed on top of the balance.

Two things follow, and both surprise people:

Arrears is never added to a settlement figure. Clearing the balance clears the arrears with it.
Arrears is not counted as capital. The account’s balance figure does not include it. See position types.

A loan carrying 12,000 of arrears is settled in full. The 12,000 is not added to the amount required. When the money lands, the balance goes to zero and the arrears goes to zero with it.

Worked example

Alex holds a loan of 100,000 at a fixed 5%, accruing on an Actual/365 basis, with an instalment of 5,000 collected by debit order.

On the day the instalment falls due:

Order	What happens	Balance	Arrears
Start		100,000	0
1	The instalment falls due	100,000	5,000
2	The collection settles as a repayment of 5,000	95,000	0

The instalment falls due before the money applies, deliberately. An account that is late for part of a day is still recorded as late, so ageing and collections read the same story a customer would tell.

Interest then follows the balance:

Day	What accrues
The day before the instalment	100,000 × 5% ÷ 365
The day the repayment settles	95,000 × 5% ÷ 365

The rate and the day count are read as of each day, not as of today. See day count conventions and changing a rate.

When the due date is not a working day

An instalment due on a Saturday still falls due on the Saturday. The collection cannot settle until the Monday, so the account carries 5,000 of arrears over the weekend and clears it on the Monday.

That is not a fault. See business day conventions.

Why the balance fell by less than the customer paid

Because the balance moved twice, and only one of the moves was the payment.

Over one cycle the loan balance goes up by the interest that capitalised and the fees that were charged, and down by the full repayment. The customer sees the net of the three, and reads it as the payment being short.

Nothing was withheld. The payment came off in full, and the month’s interest and fees went on.

Read the entries in date order on the transaction list and the arithmetic is on the page: the capitalisation, the fee, and the repayment are three separate rows, each with its own amount.

Which part of an instalment is interest

The Schedule panel answers this directly. Each instalment row carries a Capital column and an Interest column, and the two add up to the instalment.

The split is worked out interest first. Each instalment absorbs the interest that capitalised since the last one, up to the instalment amount, and whatever is left is capital. Interest an instalment cannot cover carries forward to the next one.

Two properties hold across the whole term, and they are what makes the panel worth showing a customer:

The interest part falls and the capital part rises with every instalment.
The capital parts add up to the amount advanced. On a loan of 1,500,000 over 60 instalments, the capital columns total 1,500,000.

This split is a reading of the schedule, not a second set of entries. Nothing on the transaction list is divided this way, and changing it is not something your organisation configures.

Paying more or less than the instalment

Nothing is refused and nothing is held back. The balance and the arrears both move by whatever arrived.

What the customer does	What you see
Overpays by 25,000 twice	Arrears goes negative, showing 50,000 paid in advance
Underpays by 10,000 twice	Arrears shows 20,000 outstanding

Negative arrears is the account being ahead, not an error.

An account ahead and an account behind both quote the same contractual instalment. The advance is netted back out, so being ahead never raises the instalment, and being behind never depresses it.

When a repayment counts from

A repayment carries a value date like everything else, and it is the value date that drives interest — not the day the entry was booked.

A collection is raised days before it settles. It reduces interest from the day it settles, never from the day it was raised. See value dating.

A repayment posted with a value date in the past makes the account revalue from that date, so interest already charged is corrected.

Correcting one

A repayment can be reversed from the transaction list, if your organisation marks it reversible. The reversal is booked today and value-dated at the original’s value date, so interest is put back as though the money never moved. See reading the transaction list and countersign.