Payment Pouring

Payment pouring refers to the systematic allocation of payments across various types of financial obligations within an account. Understanding how payments are distributed is crucial for both lenders and borrowers, as it directly impacts how debts are satisfied and financial obligations are met.

Understanding Payment Pouring

Our system handles payment allocation at the transaction level, where financial obligations are created based on the specific type of lending product. For term loans, obligations are established at origination since the repayment structure is predetermined. In contrast, products like lines of credit generate obligations at statement creation, when all balances and associated charges can be accurately assessed.

Default Payment Pouring Configuration

Our standard payment pouring configuration follows a carefully designed sequence that prioritizes both obligation type and age. The system allocates payments in the following order:

Fees (starting with the oldest)
Interest
Principal

This default configuration has been developed in consultation with industry experts and is optimized for most credit and installment-based products.

Age-Based Payment Pouring

For clients who prefer a simpler approach, we offer an age-based payment pouring option. In this configuration, the system allocates payments strictly based on the age of obligations, regardless of their type. This means the oldest outstanding obligation will always be satisfied first, providing a straightforward and chronological approach to debt resolution.

Custom Payment Pouring Configurations

We understand that different lending institutions may have unique requirements for payment allocation. Our system supports customized payment pouring configurations to accommodate various business needs. Here are some examples:

APR-Priority Pouring: Payments can be configured to target high-APR obligations first, potentially reducing overall interest costs for borrowers.
Priority Fee Allocation: For scenarios involving multiple lending partners, payments can be directed to satisfy specific fees first, such as those owed to first-position banks, before following the standard allocation sequence.

Transaction-Specific Allocation

Our system supports directing payments to specific transactions when needed. This capability is particularly valuable for lending programs that allow borrowers to make targeted payments, such as early principal payments or prepayments on specific obligations. This flexibility ensures that lenders can offer various repayment options while maintaining accurate records of how payments are applied.

Reversible Allocation

A unique feature of our payment pouring system is its reversibility. When necessary, the allocation sequence can be reversed, allowing for accurate adjustments and corrections. This capability is particularly valuable in scenarios involving payment reversals, error corrections, or regulatory compliance requirements.

Use Cases

Commercial Lending

Commercial lending operations often involve complex payment structures and multiple obligation types. Our payment pouring system can accommodate commercial lending requirements, such as prioritizing certain obligation types based on business agreements or handling multiple credit facilities within a single relationship.

Multi-Partner Lending

For lending arrangements involving multiple financial partners, custom payment pouring configurations can ensure that specific obligations are prioritized according to partnership agreements while maintaining the overall integrity of the payment allocation system.

Regulatory Compliance

The reversible allocation feature supports scenarios where regulatory requirements necessitate specific payment application sequences or when corrections are needed to maintain compliance with lending regulations.