Debt engine

We'll tell you how our tool for managing your clients' debts works.

Introduction

The debt engine is responsible for keeping your clients' debt up to date. To do this, it manages the different financing concepts, the amortization system, the defined interest rates, fines and fees, the payment allocation hierarchy, and the received payments.

Functioning

Manage different types of debt according to your product definition
  • Periodic charges: the debt generated by purchases, expenses, or charges such as a late payment fee. They constitute payable obligations for the period and do not accrue interest until their due date.

  • Cash advances: generated by cash withdrawals at ATMs. Accrues daily interest.

  • Revolving debt: the debt generated by the unpaid balance from one period to its due date, as long as the minimum payment has been covered. Accrues daily interest.

  • Refinancing: the debt generated by creating a new payment plan for an existing debt. Accrues interest from its establishment. For now, refinancing is only possible in 🇲🇽Mexico.

    • Calculates the minimum payment you have definedAt the end of a billing cycle, the calculation of the minimum payment must be made, which is the minimum amount to be paid to avoid late fees.
    Applies the payment allocation hierarchy we defined from Pomelo.
  • Payments are applied vertically: the entirety of a debt is paid off before moving on to the next one.

  • Debts are paid off in the following order:
       a. Cash advances.
       b. Revolving debt.
       c. Refinancing of account statements.
       d. Purchases and charges for the current period.
       e. Assigned as credit balance in the account.

  • Within each type of debt, prioritization is based on their age.

  • For each debt to be paid off, the priority order by concept is as follows:
       a. Fees.
       b. Penalty interest + taxes.
       c. Compensatory interest + taxes.
       d. Principal.

    • If you operate in 🇲🇽Mexico, consider that if debt components generate a charge, it is canceled proportionally. For example, a debt of $100 in principal that generates $20 in taxes, with a payment of $60, cancels $50 in principal and $10 in taxes.

    Implementation

    The debt engine is a basic functionality of our Credit Core and you don't need to do anything additional to implement it.

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