Promo Interest Credit

Operational Use Cases

• Promotional incentives: “Pay on time and we waive this installment’s interest.”
• Merchant-funded offers: Partners cover the interest portion for specific billing cycles.
• Dispute remedies: Forgive installments (or parts of them) on either repayment schedule engine without collecting cash.

Supported on both Fixed Schedule and Dynamic Schedule loan engines. On Dynamic loans the Payment Waiver allocation row runs through the advanced allocation processor, while Fixed loans apply the same row through the standard repayment allocation. Works whether or not interest recalculation is enabled; your Payment Waiver row decides which components (interest, fees, principal) the waiver clears.

How Fixed vs Dynamic differ: Loan A (Fixed engine) treats the waiver exactly like a classic repayment—only the targeted installment’s interest falls off and the EMI stays unchanged. Loan B (Dynamic engine) uses the advanced allocation strategy; waived interest can automatically spill over into fees or principal if your Payment Waiver row allows it. Keep this contrast in mind when designing UI copy or explaining promo credits to merchants.

Lifecycle Snapshot

flowchart TD
    A[Identify installments to forgive] --> B[Submit interest payment waiver command]
    B --> C[Allocation clears components per product configuration]
    C --> D[Schedule and delinquency recomputed like a repayment]

API Playbook

POST /v1/loans/{loanId}/transactions?command=interestPaymentWaiver
{
  "locale": "en",
  "dateFormat": "dd MMM yyyy",
  "transactionDate": "25 Oct 2025",
  "transactionAmount": 18.50,
  "note": "On-time payment incentive",
  "externalId": "IPW-2025-10-25-OT"
}

Key points

• Loan must be Active (Fixed or Dynamic engine) and have outstanding components on at least one installment. Waivers can also be posted on loans that are technically Closed/Overpaid when policy allows.
• The Payment Waiver row in the loan product’s payment allocation strategy controls how the amount is split (e.g., Interest → Fee → Principal). If you need interest-only forgiveness, ensure interest is the only or first component in that allocation row.
• Because the command behaves like a repayment, you can post it on the current business date even when the installment is due later; Embarc updates the schedule immediately.

Tips for Operations Teams

• Keep a cheat sheet of the Payment Waiver allocation order for each product so agents know whether the waiver will touch principal as well as interest.
• If you need a one-off interest-only adjustment but the product allocation prioritises principal, temporarily edit the product’s Payment Waiver allocation or use waiveinterest instead.
• Use this command for marketing programs or installment-by-installment incentives; use waiveinterest for broad interest forgiveness across the entire loan.

Baseline Example (Fixed Loan A)

Baseline A (Fixed Schedule) has installment #4 scheduled for 13 Apr 2026 with USD 91.33 interest and USD 974.86 principal (total USD 1,066.19). Posting an Interest Payment Waiver of USD 91.33 on the due date produces:

Because Fixed products use the Payment Waiver allocation row through the standard repayment allocation (Interest → Principal), the command behaves like a cash repayment: no principal movement occurs unless your allocation row explicitly routes excess amounts into principal.

Transactions created (Baseline A)

Loan summary delta (Baseline A)

Accounting snapshot (Baseline A)

Baseline Example (Dynamic Loan B)

Baseline B (see baseline-loans.md) has installment #4 scheduled for 21 Feb 2026 with USD 2.77 interest and USD 100.00 principal. Posting a Promo Interest Credit of USD 2.77 on 18 Feb 2026 produces:

Unlike Baseline A, Dynamic loans can continue allocating any excess amount into fees or principal if your Payment Waiver row lists those components. In this example the row is Interest → Fees → Principal, so the waiver stops after clearing interest; if you supplied USD 5 instead of 2.77, the additional 2.23 would flow into fees (if present) and then principal.

No other installments change; the borrower simply sees installment #4 reduced by USD 2.77. Because the allocation row is Interest → Fees → Principal, only interest is cleared. Adjust the row if you ever need the waiver to touch fees or principal.

Transactions created

Loan summary delta (Baseline B)

Accounting snapshot

AccrualBasedAccountingProcessorForLoan.createJournalEntriesForInterestPaymentWaiverOrInterestRefund(...) posts this entry immediately, so finance sees the waived interest the same day.

Verification checklist

1. Call GET /v1/loans/{loanId}?associations=repaymentSchedule,transactions,loanSummary before and after the command; confirm loanSummary.interestOutstanding drops by USD 2.77.
2. Inspect transactions[] and confirm a new INTEREST_PAYMENT_WAIVER entry exists with amount 2.77 and the expected note/externalId.
3. Check the repayment schedule: installment #4’s interestDue should be 0 while principalDue remains USD 100.
4. Optional: review GL entries via your accounting bridge to see the debit/credit pair above.

Sandbox request template

POST /v1/loans/{{baselineDynamicLoanId}}/transactions?command=interestPaymentWaiver
{
  "locale": "en",
  "dateFormat": "dd MMM yyyy",
  "transactionDate": "18 Feb 2026",
  "transactionAmount": 2.77,
  "note": "Promo interest credit – installment 4",
  "externalId": "IPW-BL-B-0001"
}

Replace {{baselineDynamicLoanId}} with the ID of your Baseline B clone in QA. Run the verification checklist above immediately after posting.