Irregular Payments - account for additional or larger payments
There are several types of Irregular Payments and many ways to account for them. This discussion will describe how to account for a larger than scheduled payment by restructuring the back end of the loan.
- Enter the cash flow information as shown below. Note that the Amount field on the Payment Event (line 2) is Unknown. This will setup the loan with a regular payment schedule.
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- Press [F9], [Ctrl]+[U], or click Calculate from the Compute group to compute the amount of the payments. The calculated monthly Payment Amount is 438.71.
- To see the individual payment events, click Expand from the Rearrange group and then choose All lines. Your cash flow window should now appear as shown below. Note that each of the payments (lines 2 - 25) is for the same dollar amount = regular monthly payments.
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- Now let's assume the 4th payment is for $1,000.00. Change the Payment Amount on line 5 to 1,000.00. To see how this affects the amortization schedule, press [F4] or click the Amortization Schedule button to the right in your cash flow data window. A Rounding dialog appears as shown below with a negative rounding amount.
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- To avoid overpaying and to account for the negative rounding amount, the back end of the loan should be restructured. Click Cancel in the Rounding dialog to close it. Click Sort from the Rearrange group and then choose Merge all lines. Your cash flow window should now appear as shown below.
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- Change the Number field on line 4 (the multiple payments line) to U for Unknown. Press [F9], [Ctrl]+[U], or click Calculate from the Compute group to compute the number of payments that still need to be made to pay off this loan. A Rounding dialog appears as shown below with a Rounding Amount of 267.18.
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- For this example, choose Balloon to handle the rounding amount and then click OK. (Whether you use Balloon or Last Payment depends on the amount.) Your cash flow window should now appear as shown below.
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Result: The back end of the loan has been restructured to account for the larger than scheduled payment.