Settling a loan early
A customer can close a loan before the end of its term by paying what is outstanding, plus whatever your organisation charges for ending it early.
There are two ways to do it, and they differ in who moves the money.
| Way | Who pays | When the account closes |
|---|---|---|
| Quote the customer | The customer sends the money themselves | When their money arrives and matches the quote |
| Settle it for them | You collect the total from the customer’s bank account | Straight away, once the positions are zero |
You work with quotes on the Settlement Quotes panel of the account screen.
The life of a quote
graph LR
ISS["Issued<br/>figure and deadline<br/>frozen"]
ACC["Accepted<br/>the loan is settled<br/>and closed"]
EXP["Expired<br/>the deadline and its<br/>grace days have passed"]
CAN["Cancelled<br/>withdrawn or replaced<br/>by a newer quote"]
ISS -->|"money arrives, in time and in range"| ACC
ISS -.->|"nothing arrives"| EXP
ISS -.->|"you re-quote or withdraw"| CAN
style ISS fill:#1e40af,color:#ffffff
style ACC fill:#059669,color:#ffffff
style EXP fill:#374151,color:#ffffff
style CAN fill:#b45309,color:#ffffffAn account has at most one quote open. Everything else on the panel is history: what you quoted, and what became of it.
What the panel shows
| Column | What it holds |
|---|---|
| Reference | The reference the customer quotes back to you. It carries the account number and the day the quote was issued |
| Issued | The day you issued it |
| Valid To | The last day the figure holds good |
| Settlement Figure | The one number you give the customer |
| Charges | Each charge line on the quote, with its amount |
| Status | Issued, Accepted, Expired, or Cancelled |
Issuing a quote
- Open the account, go to the Settlement Quotes panel, and select Issue Early Settlement Quote.
- Check the preview — the charge lines, the figure, and the deadline.
- Confirm.
Issuing is eligible for countersign, so a second pair of eyes can be required on it.
Issuing a second quote withdraws the first one. That is how you re-quote: you do not have to cancel before you re-issue.
An account quoted at 304,486 and then re-quoted at 303,336 shows both on the panel. The first reads Cancelled, the second reads Issued.
The quote is also lodged as money you are expecting, under its own reference, so a bank statement line carrying that reference is matched to this account rather than landing unallocated. See payment references.
What goes into the figure
The figure is the balance the customer owes, plus the interest that has accrued and not yet capitalised, plus each charge line your organisation configures for early settlement.
Arrears is not added. Arrears is a memo of the slice of the balance that has fallen due and not been paid — it is not a second debt on top of the balance. Settling the balance settles the arrears with it. See how a repayment is recorded and position types.
A loan carrying 12,000 of arrears is quoted and settled. The 12,000 is not added to the figure. When the money lands, the balance goes to zero and the arrears goes to zero with it.
What the customer is held to
The figure and the charge lines are frozen when you issue. Whatever the account does afterwards, the customer is held to one number and one deadline.
Interest, though, keeps accruing while they arrange payment. So when the money arrives, the amount actually needed is worked out again against the account on the money’s value date. The gap between the two is usually a day or two of interest, and the tolerance below absorbs it.
Interest accrues at the account’s rate over the actual number of days in that year — 365, or 366 in a leap year. See how interest is calculated and day count conventions.
The early termination charge, and its cap
Ending a loan early usually carries a charge — typically a set number of days of interest at the account’s own rate.
Where your organisation lends under the South African National Credit Act, that charge is capped. Small and intermediate agreements carry no early termination charge. Large agreements — a principal of R250,000 or more — may be charged at most three months’ interest.
The cap is not built into the platform. It is a formula your organisation configures, worked out against each agreement at the moment of quoting, and the charge is whichever is lower — the days of interest, or the cap. Below the threshold the cap is zero, so the charge is zero.
The standards register row National Credit Act 34 of 2005 (South Africa) §125 — early settlement records what the platform claims here. What it claims is that the charge is configurable and evaluated per agreement. It does not claim to classify an agreement for you: which threshold an agreement falls under follows from what your organisation configured and what was captured on the account.
Outside South Africa the cap is simply left unset, and the charge is uncapped. A tenant lending in another jurisdiction configures its own cap.
How long a quote holds good
A quote is valid on the day you issue it and for the days after it that your organisation configures.
A ten-day quote issued today is valid to the ninth day after today.
What counts is the value date of the customer’s money, not the day you see it. A deposit value-dated on the last valid day still settles, even if the bank statement carrying it only reaches you the following week. Money value-dated after the deadline does not — the quoted figure no longer covers the interest that has since accrued, so it lands as an ordinary deposit and you decide what to do, usually re-quote.
Because of that lag, the quote stays open past its own deadline for a few grace days before it is marked Expired. With three grace days configured, a quote is still Issued three days after its deadline and reads Expired on the fourth. The grace days let money that arrived in time still find an open quote. See value dating.
When the money arrives
Nobody accepts a quote. There is no accept button, and no separate step for you to remember.
Money reaches the account the ordinary ways — matched from a bank statement, or taken over the counter. Whenever it lands on an account holding an open quote, it is measured against what the account needs that day.
| What arrived | What happens |
|---|---|
| The amount needed | The loan settles and closes |
| Short, but inside the tolerance | The loan settles and closes; the few rand left over is written off |
| More than needed | The loan settles and closes; the excess is refunded to the customer’s nominated bank account |
| Short by more than the tolerance | It is an ordinary deposit. The balance comes down and the quote stays open |
Paying the full quoted figure a few days early is the common overpayment: the customer has paid for interest that never accrued. It goes back to them rather than sitting as a credit on a closing account. See taking money out and choosing which account money moves through.
When the loan settles, the transaction list shows each step in date order — the interest capitalised, the settlement charge, the receipt, the write-off or refund, the arrears cleared. The account then closes, and its closure reads “Settled early”. See reading the transaction list.
Withdrawing a quote
Select Cancel Early Settlement Quote on the account’s Settlement Quotes panel.
The account is left with no open quote, and money arriving afterwards is an ordinary deposit. Cancel when a customer has changed their mind, or when you want the account to stop expecting the money.
Settling without a quote
Settle Early does the whole thing in one action, for a customer who has agreed the figure with you and wants you to collect it.
- Open the account and select Settle Early.
- Check the preview — the interest to be capitalised, the settlement charge, and the total to be collected.
- Confirm.
The interest accrued to date is capitalised, the settlement charge is posted, the total is collected by debit order from the customer’s nominated account, any arrears is cleared, and the account closes as an early settlement. See how a payment picks its rail.
The action is refused when there is nothing left to settle, with a message saying so. Settling early is eligible for countersign.
The account closes before the debit order has cleared, because every position is already at zero. If the collection is later returned unpaid, the settlement is undone: every leg it posted is reversed back to the settlement date, the account reopens, and interest is re-worked over the days it spent closed — so the loan stands exactly where it did before the attempt.
A loan of 300,000 with a 500 service fee and 2,150 of accrued interest is settled and closed. The collection comes back. The balance returns to 300,500 and the accrued interest to 2,150, and the account is Active again. Only the three legs the settlement posted are reversed — a fee charged the same day for some other reason is left alone.
The whole sequence stays on the audit trail: settled, closed, returned, undone, reopened.
Charging an early redemption fee on its own
Early Redemption Fee is a different action, and it belongs to wholesale lending and swaps rather than to retail loans.
It charges a negotiated fee for breaking a deal before its term ends, without closing anything. You type in the amount, because the fee is agreed deal by deal, not priced from a table. It can be value-dated to the day the break was agreed, and it is eligible for countersign. See value dating and transaction types.
Use it where the break is negotiated separately from the money — the fee is a charge on the account, and the redemption itself is handled as ordinary repayment. On retail loans, the settlement charge is part of the quote instead, and you do not use this action.
Worked example
Alex holds a loan with Woodgrove Bank and wants to settle it. Sam quotes them.
- The balance is 300,000, with 2,150 of interest accrued and not yet capitalised.
- Sam selects Issue Early Settlement Quote. The settlement charge comes out at 3,336 — days of interest at the account’s own rate, under the statutory cap — and the settlement fee at 1,000.
- The quote figure is 306,486, valid for ten days. Sam reads Alex the reference and the deadline.
- Alex pays 306,986 — 500 more than the figure.
- The loan settles. Interest is capitalised, the charges post, the money is applied, the arrears is cleared, and the account closes as an early settlement.
- The 500 excess is refunded to Alex’s nominated bank account.
The quote on the panel now reads Accepted.
What your organisation configures
- Which products can be settled early. Only account types carrying an early settlement setup offer these actions. A product without one shows neither the panel nor the operations.
- What is charged. The number of days of interest in the settlement charge, any fee alongside it, and whether that fee carries tax. Each charge line posts through a transaction type, so its accounting treatment and its rounding come from there. See transaction types.
- The cap. The formula that caps the early termination charge, evaluated against each agreement. Left unset outside jurisdictions that impose one.
- How long a quote lasts, and how many grace days it keeps after its deadline before expiring. Grace days can be counted on your organisation’s business day calendar rather than calendar days. See business day conventions.
- The tolerance. How far short a payment may fall and still settle the loan, set per product.
- Where a refund goes, and which account a collection is taken from — both read from the customer’s nominated account on the loan.
- Whether the capability is licensed at all. A tenant without settlement quotes sees no panel and no quote actions. See switching features on and off.
Related: how a repayment is recorded, the repayment schedule, paying money in, reading the transaction list.