Buy Down Fees

Operational Use Cases

• Merchant/partner subsidies: Record upfront contributions that lower the borrower’s effective rate on Dynamic loans.
• Promotional financing: Capture subsidies for “0% for X months” campaigns so revenue is recognized over time.
• Internal incentives: Lender-funded rate reductions tracked separately from borrower payments.

Supported only on the Dynamic repayment schedule engine with the Buy-down Fee feature enabled on the product. Amortization is handled automatically by the scheduled amortization job (and when the loan closes or charges off).

Lifecycle Snapshot

flowchart TD
    A[Determine subsidy amount] --> B[Log subsidy via Payments API]
    B --> C[Embarc posts buy-down fee transaction]
    C --> D[Scheduled amortization job posts BUY_DOWN_FEE_AMORTIZATION transactions]

API Playbook

1. Log the subsidy through Payments API

   HTTP

   POST /v1/payments
   {
     "loanId": 640,
     "mode": "LOG",
     "paymentCommand": "buyDownFee",
     "valueDate": "01 Dec 2025",
     "amount": 120.00,
     "note": "Holiday promo subsidy",
     "externalReference": "BDF-HOLIDAY-2025"
   }

   • Use mode=INITIATE if Embarc is also pulling funds from the merchant; otherwise log the settlement.
   • After the payment call, Embarc posts the buy-down fee transaction and updates the deferred balance.
   • Loan must be Active, Dynamic engine, and buy-down fee enabled. The effective date must fall on/after disbursement.

2. Adjust (if necessary)

   HTTP

   POST /v1/loans/{loanId}/transactions/{transactionId}?command=buyDownFeeAdjustment
   {
     "locale": "en",
     "dateFormat": "dd MMM yyyy",
     "transactionDate": "10 Dec 2025",
     "transactionAmount": 20.00,
     "note": "Reduce subsidy"
   }

   Adjustment cannot exceed the remaining unamortized amount.

Tips for Operations Teams

• Capture externalId or notes if you need to tie entries back to partner approvals or invoices.
• The amortization job automatically reduces the deferred balance; use your finance dashboards to track recognized vs. unrecognized amounts.
• Before logging a buy-down fee, confirm the loan product’s payment allocation order and interest settings so the subsidy behaves as expected (Dynamic engine + buy-down fee enabled).

Baseline Example (Dynamic Loan B)

Assume Baseline B receives a USD 30.00 merchant subsidy on 12 Jan 2026 (after the first installment is billed). Posting buyDownFee for USD 30.00 produces:

During this period, statements show both the original loan installments and a separate “Merchant subsidy amortization” line, so operations teams can reconcile the subsidy against partner invoices.

Transactions created

Loan summary delta

Accounting snapshot

Accounts are determined by the loan product’s buy-down fee mapping (buyDownFeeAccount, incomeFromBuyDownFee*).

Buy-down fee amortization does not change borrower installments; it strictly reduces the deferred balance and posts income.

Sandbox request template

POST /v1/payments
{
  "loanId": {{baselineDynamicLoanId}},
  "mode": "LOG",
  "paymentCommand": "buyDownFee",
  "valueDate": "12 Jan 2026",
  "amount": 30.00,
  "note": "Holiday merchant subsidy",
  "externalReference": "BDF-BL-B-0001"
}

Run the amortization job (or wait for the next scheduled run) and confirm the deferred balance declines as expected.