Guest Lisak Posted January 6, 2010 Posted January 6, 2010 Currently we have our software set to sixty month maximum loan duration. We have a concern that we are setting up the loan to exceed the five year limit from the start. We are considering changin the maximum to 59 months. Is anyone doing this?
Belgarath Posted January 6, 2010 Posted January 6, 2010 Call me dense, but I'm not sure I understand the perceived problem. The plan processes a loan, effective 1/1/2010. First payment is due 1/31/10. etc---so your 60th payment is due on 12/31/2014. That's within the 5 years, and 60 total monthly payments. What am I missing?
Guest Lisak Posted January 6, 2010 Posted January 6, 2010 Call me dense, but I'm not sure I understand the perceived problem. The plan processes a loan, effective 1/1/2010. First payment is due 1/31/10. etc---so your 60th payment is due on 12/31/2014. That's within the 5 years, and 60 total monthly payments.What am I missing? The loan maturity date is based on the day the loan is requested - however we allow set up time (usually 2 weeks) for the first deduction. Since the first payment is two weeks after the loan origination, a 60 month loan will be paid off after the 62nd week.
BG5150 Posted January 6, 2010 Posted January 6, 2010 As long as the set-up time is no longer than 1 payment period you are okay. Eg. if you set up a loan on Jan 5 on a semi-monthly payment, and the first payment is due Jan 15, the last payment will be either Dec 31, 2014 or Jan 1, 2015, depending on if it 1st-15th or 15th-31st. Same situation, but quarterly payments. Loan date Jan 5, first payment April 1. 20 payments will be done on Jan 1, 2015. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
Kevin C Posted January 6, 2010 Posted January 6, 2010 BG & Belgarath, what if the loan date is December 23 instead of January 1 or 5?
Belgarath Posted January 6, 2010 Posted January 6, 2010 Then make the first payment is due January 22 instead, and you still have it repaid within 5 years. But if there's a built-in delay in the system, such as Lisa posits, then yes, I could see this being a violation - although I'm not sure if the IRS/DOL would really care. But to be safe, if you have such a system, then Lisa's 59 month limit should work fine.
Kevin C Posted January 6, 2010 Posted January 6, 2010 That only works if January 22 is a paydate. We always use slightly less than 5 years for the max loan period.
BG5150 Posted January 7, 2010 Posted January 7, 2010 Has anyone ever had a problem with a loan that went a week or two over because of the first payment date stretching out a little too far? QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
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