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What happens when repayments are late?
What happens when repayments are late?
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When it comes to MSME loans, late repayments are not uncommon. Many factors may cause the situation. Although delays don’t necessarily mean default, we do our best to follow up on delayed loan installments and have them repaid. We do this to ensure that repayments to lenders happen as quickly as possible.

Late Repayment Interest:

If a borrower fails to submit full repayments, then we will fine a daily late interest fee of 0,1% x loan principal (based on repayment deadline). Late interest fees will be distributed to lenders as compensation for late repayment. We also place a late penalty fee to prevent borrowers repaying after loan installment deadline.

Example: you lend Rp 10 million on a loan with an interest rate of 12% and a tenor of 4 months. Loan installments are due at the 1st of each month. However, the borrower pays his repayment on the 12th of the month. Therefore, you would receive Rp 2,5 million in loan principal, Rp 400.000,- in interest interests, and Rp 27.500,- in late interest interests (0,1% x 11 days x Rp 2.500.000,-).

How does Modalku process loan collections?

For term loans, all borrowers must fill a General Interbank Recurring Order (GIRO) form to debit monthly loan installments directly from their businesses’ operating bank accounts. Loan installments can be paid on the 1st or the 15th of each month, depending on the due date of each term loan. We do not use GIRO for Invoice Financing.

If debiting loan repayments with GIRO fails and there are no alternative repayments received by our team on the due date, our account manager and/or credit officer will contact the borrower on the next business day to inform him that GIRO repayment has failed and urge him to submit the repayment using a check or with a bank transfer.

We provide information on late repayment status regularly on our website. You can access this on the “Portfolio” tab and scroll down to the “Loan Details” section. At the column on the right, you would be able to view “Notes”. Click on the icon to view the most recent Repayment Notes.

In several cases, we would ask borrowers to provide bank statements, contract letters, and purchase orders to verify business cash flow. Doing this would help us collaborate on converting borrower income into loan repayments. We may also refinance loan installments into smaller weekly repayments.

Most of our borrowers repay their loans promptly. If there are delays, they remain cooperative and make sure to submit ongoing repayments as soon as they are able.

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