Loan reconciliation guide
How to Calculate a Loan Balance After Irregular Payments
A normal amortization schedule assumes payments arrive exactly as scheduled. Once actual payments differ, the scheduled balance and the real balance can diverge.
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Accrue interest to the actual transaction date
Before applying each payment, calculate interest for the actual number of days since the previous transaction using the principal outstanding during that interval.
Apply the payment according to the loan rules
Payments may be applied to accrued interest, fees, and principal in a specific order. A principal-only payment can follow a different rule from a regular payment.
Carry the new balance into the next interval
After the transaction is applied, use the resulting principal to calculate interest through the next actual transaction date.
Do not force irregular history back onto a scheduled amortization table
A scheduled table is useful as a benchmark, but it cannot accurately represent every late, skipped, partial, extra, fee, credit, or advance transaction without being rebuilt.
If a borrower pays ten days late, the prior principal remains outstanding for ten additional days before the payment is applied. That extra accrual can change both the interest due and the amount of the payment that reaches principal.
Frequently asked questions
Why does my loan balance differ from the amortization schedule?
Actual payment dates, partial payments, skipped payments, fees, advances, credits, rate changes, rounding, and payment-application rules can cause the real balance to diverge from a scheduled table.
How do I calculate interest between irregular payments?
Calculate daily simple interest on the principal outstanding for the actual elapsed days between each transaction date.
How should partial payments be handled?
Use the application order required by the note or servicing rules. A partial payment can leave accrued interest or fees unpaid before principal is reduced.
Can I calculate a payoff after rebuilding the history?
Yes. Once the loan is reconciled through the final transaction, accrue interest through the target payoff date and add any remaining fees or adjustments.